Arcandor debate
June 3, 2009
Arcandor is seeking a government guarantee of 650 million euros ($925 million) from the German government and a loan of 200 million euros from Germany's state-owned KfW bank.
The company has around 86,000 employees and owns some of Germany's top retail chains, including department store chains Karstadt and KaDeWe and travel company Thomas Cook.
The financial aid would come from the Germany Fund, a federal government-backed fund that is assisting German businesses during the economic downturn. To qualify for aid, there are several stringent criteria dictated by European Union rules on state assistance that must be met.
But a spokesman for EU Competition Commissioner Neelie Kroes said that because Arcandor’s financial problems existed before the credit crisis kicked in, there was no basis for relaxing the criteria for EU rules on aid programs.
"Our preliminary conclusion is that Arcandor was already in difficulties before July 2008. In other words, its difficulties are not caused by the credit crunch," the spokesman said.
After meeting with Kroes in Berlin on Wednesday, Guttenberg said the pre-existing financial troubles at Arcandor did not bode well for the upcoming Commission decision on the aid.
"This negative condition is one which would fundamentally stand in the way of Arcandor qualifying for guarantees or loans as part of this Germany Fund," he said.
He said that the findings of the commission were an "essential element" in the decision to grant state aid to Arcandor.
Guttenberg said however that no decisions have made and that all parties were now awaiting the final assessment likely to come on Monday.
Jobs on the line
Meanwhile, Arcandor chief Karl-Gerhard Eick was optimistic the company would qualify for state aid. "We remain convinced that Arcandor has met the criteria in order to receive a guarantee from the Germany Fund," he said.
Works council head Hellmut Patzelt has called for a meeting with Chancellor Angela Merkel, Vice Chancellor Frank-Walter Steinmeier and Finance Minister Peer Steinbrueck over the matter. "More than 50,000 jobs are threatened," Patzelt said.
If Arcandor is allowed to fail, job losses would be almost twice the number recently saved at Opel by government assistance. To save Opel, the German government recently agreed to guarantee nearly 3 billion euros and to provide a 1.5-billion-euro loan to keep it going until Canadian auto parts group Magna takes control.
On her decision to come to the aid of the carmaker, Merkel said that Opel was a "special case."
The Arcandor situation is a political dilemma for the Chancellor and her ruling coalition. With elections looming in September, the governement's handling of the situation will be closely watched.
Steinmeier, who is also Germany’s foreign minister, is challenging Merkel for the chancellorship in September. He said that insolvency at Arcandor would be the worst possible outcome.
Sources close to the situation said that Arcandor's main shareholders, Madeleine Schickedanz and Oppenheim Holding, were prepared to offer more support and could put up their 55 percent share as collateral.
av/Reuters/AFP´
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