Opel Challenge for Brussels

General Motors Corp.'s collapse has not just been a nightmare for U.S. politicians. It's proving a major headache for European politicians, too.

GM's decision to cast adrift its sprawling European operations has put several European Union countries at loggerheads as they each try to secure the jobs of their own workers. Unless the European Commission takes a tough line, the deal threatens to make a mockery of Europe's supposed single market.
The problems stem from GM's decision to group all its European operations under its Opel division in Germany. That has given Berlin the whip hand over the future of GM's 50,000 European employees, half of which are based outside Germany, notably in the U.K. and Belgium.



The combined business has a 9% share of the European market but will take a big loss this year. GM is offering to pass the business on debt-free and has painted a rosy picture of the division's future, but Opel will still hemorrhage cash for many years. This has turned the sale process into an auction of bailout promises.
Naturally, the Germans are keen to link their own promises of 1.5 billion euros ($2.09 billion) of initial aid to commitments to preserve German jobs. Even GM admits that Opel has three too many factories and 20% too many staff for a manufacturer confined to supplying the European market. The U.K. and Belgian governments rightly fear this will cause the axe to fall on their own factories. The EU Commission, whose job it is to police state aid rules, has kept a low profile, partly because it has not yet had a definitive package to judge.

But the EU needs to be vigilant. Partly because Berlin -- under pressure ahead of this year's elections -- could use its power over the process to hand Opel on a plate to the bidder most likely to protect German jobs rather than to the best long-term industrial partner. That would point to a sale to Magna, the Canadian auto-parts supplier backed by investors with close links to the Kremlin rather than to rival bidder Fiat.

More importantly, Opel's fate is a further test of the credibility of the European single market -- already under pressure as a result of the recession. Brussels must ensure that the principles of the single market are upheld, not just for the sake of GM's non-German workers, but for the sake of the rest of the European car industry. That means signaling its willingness to block any deal that falls foul of the rules, even if that means forcing Opel to follow its parent into bankruptcy.