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| Germany picks Magna as buyer for General Motors' Opel |
| Bloomberg / Berlin Jun 01, 2009, 00:40 IST |
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German Chancellor Angela Merkel’s government chose Magna International Inc as the buyer for General Motors Corp’s Opel and confirmed a financing plan aimed at helping the money-losing unit avert insolvency.
Magna, the Canadian car-parts maker that’s competing with Fiat SpA in its bid for Opel, will invest in the Russelsheim, Germany-based carmaker, Finance Minister Peer Steinbrueck told reporters at 2.13 am in Berlin after a meeting with leaders including Merkel. Germany will provide a ¤1.5 billion ($2.1 billion) bridge loan to keep Opel afloat, he said. Opel will be placed under a trust later on Saturday, shielding it from a probable GM bankruptcy next week.
“You can be sure that we didn’t take the decision lightly. All the federal and state representatives are aware that there are some risks,” Steinbrueck said. “We have a high interest in maintaining employment at all four Opel sites.”
GM is selling a majority stake in Opel, including the Vauxhall brand in the UK, as part of a global reorganisation before a US government-imposed June 1 deadline to restructure. Germany, which led the search for an investor, has a say because of the Detroit carmaker’s request for loan guarantees.
Merkel, facing national elections on September 27, is under pressure from lawmakers and labour unions to save the 25,000 German Opel jobs out of GM Europe’s 55,000 positions.
“If an agreement isn’t reached, Opel has no choice but to file for insolvency,” Juergen Reinholz, economy minister of Thuringia, said in an interview before the meeting. His is one of the four states where Opel has assembly plants. Reinholz took part in negotiations that stalled earlier this week after Germany balked at GM’s demand for immediate cash assistance. Of the ¤1.5 billion in short-term loans, GM wants an upfront payment of ¤450 million from Germany to keep Opel operating, GM CEO Fritz Henderson said in a May 28 interview. That’s ¤350 million more than the German government had anticipated, he said.
Saturday’s decision wasn’t unanimous. Economy Minister Karl- Theodor zu Guttenberg, who led the talks and has considered a planned insolvency for Opel, said he would have chosen a different solution because of the financial risks to taxpayers associated with Magna.
Aurora, Ontario-based Magna will advance ¤300 million in cash to Opel on June 2, Co-Chief Executive Office Siegfried Wolf said an interview after the announcement. He said that he expects a final contract with GM within four to five weeks.
“Opel is rescued for now,” GM Europe President Carl-Peter Forster said.
German state leaders and labour representatives have said repeatedly since bids were submitted on May 20 that they favor Magna’s offer, which includes as much as ¤700 million in investments in partnership with OAO Sberbank, Russia’s biggest lender. The plan also foresees a linkup with Russian carmaker OAO GAZ and calls for ¤4.5 billion in loan guarantees across Europe.
Fiat made a non-cash bid that would contribute factories and assets from its own carmaking operations.
IG Metall, Germany’s largest union, plans to begin talks with Magna “as soon as possible” to limit job cuts and keep plants open, Oliver Burkhard, an official of the group, said in a statement. Magna, founded by Chairman Frank Stronach, has 326 manufacturing plants, engineering centers and sales offices across North America, South America, Asia and Europe that employ about 82,000 people, according to the company’s website. About 14 per cent of its $23.7 billion in sales last year came from assembling complete cars and trucks.
Moscow-based Sberbank is interested in the deal because it will bring access to new technologies at a “fairly low” price, Chief Executive Officer German Gref said on Saturday.
“Such an asset will make it possible to restructure the automobile industry in Russia,” Gref said in an interview broadcast on Vesti-24 state television.
Fiat CEO Sergio Marchionne decided not to attend the overnight meeting, saying he was “perplexed” by Opel’s cash needs. The Italian automaker will focus on completing the purchase of a stake in Chrysler LLC, he said.
Financing Opel on an interim basis would lead to “unnecessary risks,” Marchionne said in a statement on Friday. He described the negotiations as “complicated” and “uneven.”
“This process is taking on the air of a Brazilian soap opera,” Marchionne said during a conference in Montreal. He left Berlin for North America after the stalled Opel talks.
Turin-based Fiat’s bid, which also includes GM operations in Latin America, is part of Marchionne’s plan to create a global automaker in combination with Chrysler.
Fiat still wants to buy Opel and is “very much interested” in its Latin American operations, Marchionne said. A purchase of the US company’s Saab Automobile unit in Sweden, while possible, is less likely if Fiat can’t buy Opel because the two GM brands share many parts, the CEO said.
Saab, which received protection from creditors in February, yesterday won a three-month extension to reorganise, giving it more time to complete a sale and reach a debt-reduction agreement with creditors.
Outside Germany, Opel also operates assembly factories in countries including the UK, Spain, Poland and Belgium.
Germany’s federal government agreed to provide half of the ¤1.5 billion German backing that GM has sought for Opel, with the remainder split among the four states.
Opel, founded in 1862 by Adam Opel, started out making sewing machines and bicycles before going on to produce cars, including its “Laubfrosch,” or tree frog, model. GM purchased 80 per cent of Opel in 1929 during the last economic crisis, after asset prices plunged worldwide. Two years later, GM bought the rest of Opel, establishing itself as the biggest carmaker in Europe through the 1930s.
GM, the world’s largest automaker until its 77-year reign ended last year, will file for bankruptcy on June 1 and sell most of its assets to a new company, people familiar with its plan said May 28.
That makes German workers keen to see a government trust. Employees have a say in Opel’s sale because GM’s business plan calls for $1.2 billion in concessions from European workers.
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