Saving Arcandor?
June 2, 2009
Arcandor, the parent company to the troubled German department store chain Karstadt and tourism giant Thomas Cook, is the latest company to plead for financial assistance from Berlin. In the wake of Opel's German bailout and insolvency proceedings for its US parent General Motors, Arcandor says it too needs a rescue package by June 12 to head off impacts from the global financial crisis. Insolvency in Arcandor's case would be a "giant mistake," according to its chief executive Karl-Gerhard Eick.
Arcandor has 56,000 employees at its Karstadt department stores together with its mail-order firm Primondo and tourism provider Thomas Cook.
Arcandor's rescue plan forsees a 200 million euro credit from Germany's KfW bank for reconstruction, plus state guarantees worth 650 million euros and further contributions worth 350 million euros from Arcandor's wealthy owners and its suppliers of goods and rented premises. Eick warns that insolvency would cost Germany at least one billion euros, alone through lost taxes and resulting social welfare burdens.
Arcandor aid an election issue
Thirteen weeks out from Germany's federal election in September, the rival center-left Social Democrats in Chancellor Angela Merkel's grand coalition, such as SPD chief Franz Münterfering, say help for Arcandor must be forthcoming to save jobs and keep city centers alive.
SPD chancellor candidate Frank-Walter Steinmeier has urged Arcandor to talk with another chain, Metro, to seek a solution. Meanwhile criticism of the interventionist course is growing louder among Merkel's supporters.
Merkel's conservative CDU colleague Michael Fuchs, who heads a parliamentary group representing small and medium-sized businesses, says he's not inclined to help Arcandor's retail subsidiary.
"I don't want give Karstadt a lift under the arm. It's not conceivable that we help a concern that has run itself poorly and which has a poor management, when on the other hand we have companies that ready to take over Karstadt."
Bailouts proving costly
The potential burden from bail-outs on Germany's federal and regional state governments - and eventually taxpayers - is hefty. So far, 1,200 companies have sought nearly 4.7 billion euros in government aid and credit guarantees, according to the Frankfurther Allgemeine Sonntagszeitung newspaper.
Economics Minister zu Guttenberg says Arcandor's application – like the others, large or small - will be checked on the basis of "objective criteria" without preconceived notions. "The requirement of sensible examination and differentiation applies to all participants, to politicians as well as companies," he said.
Finance Minister Peer Steinbrueck, a Social Democrat, denied that anyone in government was on the verge of plundering the state coffers to rescue firms ahead of the election. Interviewed by Deutschlandfunk German public radio, Steinbrueck said each firm's perceived plight would be assessed on a case-by-case basis. Aside from jobs, he said a key goal was to safeguard Germany's industrial framework with technologies for the future.
"It could be that one determines that behind Arcandor are shareholders or assets that can be called up; then a (state) guarantee would not eventuate; and, on the other side, one could come to the realisation that there are 50,000 jobs, which cannot simply vanish."
Merkel defends Opel bailout
On the campaign trail, Chancellor Merkel herself has insisted that Opel's rescue, ahead of GM's insolvency application, was prudent.
"What I do not want is that Opel gets drawn into the turmoil of an American insolvency, where at the end the filet pieces are taken away; and that was the reason why we said: we must first of all separate, so as to give them a chance. I believe that's what the employees of Opel are entitled to."
Her comments came just ahead of Tuesday's release of employment statistics for the 16-nation euro zone. The count soared 396,000 in April, pushing joblessness in the zone to its highest level this decade at 9.2 percent. For the 27-nation EU as a whole, the rate crept up to 8.6 percent, according to the Eurostat data agency.
ipj/Reuters/AFP/dpa
Editor: Trinity Hartman