GM hits the brakes on Opel deal

[nadepalma]

GM hits the brakes on Opel deal; no signing with Magna this week
Automaker's board to discuss sale to Magna on Nov. 3
October 23, 2009

FRANKFURT (Reuters) -- General Motors Co. put on hold a deal to sell a 55 percent stake in carmaker Opel to a Russian-backed consortium led by Canadian auto parts group Magna International Inc., GM's chief negotiator on the deal said on Friday.

No sale can proceed until the U.S. carmaker's board of directors discusses the Opel deal at a meeting on Nov. 3, chief negotiator John Smith said in a blog entry, pouring cold water on hopes that the sale contract could be signed this week.

"Given the significance of the Opel transaction, GM's board will soon meet in its regularly monthly meeting to consider Minister zu Guttenberg's letter and changes to the Magna/Sberbank proposal that have occurred since its last review on September 9," Smith said in the blog.

He was referring to German Economy Minister Karl-Theodor zu Guttenberg's request to GM -- prompted by European Union concerns about promises of German state aid -- to confirm that the carmaker chose Magna for business and not political reasons.

In the meantime, the company would work to resolve remaining open points with the Magna/Sberbank proposal, including labor cost reductions and a plan to obtain 4.5 billion euros ($6.8 billion) in aid sought from states with Opel plants, Smith said.

Reduced number of job cuts

Opel's workers -- who face about 10,000 job cuts under the new owners from 50,000 now -- are supposed to get a 10 percent stake in the new company in return for labor cost concessions, while GM will keep a 35 percent stake.

GM decided last month to sell a majority stake to Magna and its Russian partner Sberbank.

Opel's buyers originally intended to eliminate about 10,500 jobs in Europe, including about 4,000 in Germany, but talks with labor have resulted in promises to cut fewer jobs.

MORE AT AutoNews.com

[Ambalanche]

You know? GM really needs to stop announcing sales, plans and such until it is DONE! This looks like they haven't done their homework along with Saturn and who knows if the Hummer deal is actually going to go through?

[BlackGTP]

An interesting game GM is playing with Opel. I wonder what their goal is, my hope is that they are trying to keep it and/or keep it out of the Russian's hands.

[Orbit]

Originally Posted by BlackGTP

An interesting game GM is playing with Opel. I wonder what their goal is, my hope is that they are trying to keep it and/or keep it out of the Russian's hands.

I think that GM has no real leverage here because it has no real money to invest in Opel (6 billion +). The real driver for the deal are European trade commisions, who may rule that Germany violated certain trade guidelines in basically shutting out any buyer other than Magna/Russia. I think that the Germans know more jobs will be lost if GM retains majority control, because GM has no resources to revive Opel. Also, I bet that the estimate of 6 billion + needed for Opel restructuring is too low. That is, the company is in even worse shape than it appears (just like GM last December).

[cgriff]

Originally Posted by BlackGTP

An interesting game GM is playing with Opel. I wonder what their goal is, my hope is that they are trying to keep it and/or keep it out of the Russian's hands.

Agreed. As long as it is financially feasible I think GM needs to hold on to Opel and make an effort to get thier costs in line with the rest of the divisions.

[fp115]

Originally Posted by Ambalanche

You know? GM really needs to stop announcing sales, plans and such until it is DONE! This looks like they haven't done their homework along with Saturn and who knows if the Hummer deal is actually going to go through?

This is possible how exactly? There are too many parties involved. If GM does not say a thing, rumours come out and make it even more difficult to negotiate with the parties involved.

[flctinman]

why didn't they do to opel what they did in the u.s.? they could have shut them down for 6 months and cut to the bone like they did here. i guess this is what happens when a countries WORKERS stick together rather then hope for the worst on their neighbors and communities like americans do. so-called free trade agreements in america are obviously not free nor are they equal and are slowly tearing america apart. ross perot warned us all about that 'big sucking sound you hear will be jobs going south' when nafta was thought of but no-one listened......

[Quest]

The Crux of the matter is this: Magna is finding it very difficult to make the cuts necessary to employment and operations, to make a turnaround for Opel possible. There is little likelihood of the Russian market turning around soon enough to meet the financial targets put forth by Magna; their whole plan revolves around Russia not Western Europe. Furthermore, for Opel to even have a chance at being successful in Russia they need to produce there; this fact alone makes any promises to keep Western Europe factories, especially German, open with minimal job cuts nonsensical.

The Western European auto sector has excess capacity with a stagnate/declining market that is currently being sustained by Government subsidies. In order to survive long-term Opel needs to lose at least three factories and employment levels to be reduced by ~15,000 not the 10,000 they planned and that is being whittled down to ~5-7,000.

Opel's buyers originally intended to eliminate around 10,500 jobs in Europe, including around 4,000 in Germany, but talks with labour have been whittling down the number of cuts.

Workers in Spain are due to vote on a preliminary deal that would keep a plant there open at the cost of 900 jobs. [ID:nLN191002]
UK-based union Unite has already reached an agreement with Magna that would preserve two Vauxhall production plants and rescue 600 of the jobs that were slated to go. Vauxhall employs around 5,500 people.

http://www.reuters.com/article/mnaNe...58258320091023

Opel only makes sense going forward if it’s taken a bit upmarket, which they’ve been trying to do, and combined with Chevrolet in Europe – similar to a Buick Chevrolet arrangement in NA. This is what Magna and the Russians wanted at first but GM rightly refused – nothing else makes sense in the long-run.

There has got to be something going on behind the scenes here as the whole deal as being presented publicly doesn’t make sense for anyone. Well, maybe the Russians but it would take them 10 years to employ the current Opel/GM IP correctly.

An Aside: Originally the UK was counting on Ampera production for the UK as a reason for extending Opel the British share of a bailout. However, as was seen last week, GM decided to keep Voltec Platform production in the US. Contrary to what was said publicly it was done to protect the IP. Magna deciding not to produce it had nothing to do with the decision, notice how quickly that dropped of the radar screen.

Again, at the risk of being repetitious, odds are that there is something more going on here then what is being put out publicly.

[OldsReliable]

This is ridiculous and embarrassing. I mean, a multi-milion dollar company, that has just been "reformed" cannot make up their flippin mind about something as important as this???
WHO RUNS THIS COMPANY?!?!?!
Honestly, if I would manage my store like that, I'd be bankrupt, too!

[fp115]

Originally Posted by OldsReliable

This is ridiculous and embarrassing. I mean, a multi-milion dollar company, that has just been "reformed" cannot make up their flippin mind about something as important as this???
WHO RUNS THIS COMPANY?!?!?!
Honestly, if I would manage my store like that, I'd be bankrupt, too!

Do you not pay attention to the news? The EU made a report that gave permission to keep Opel and be eligible for the funds from the German government. Now GM gets to review the investment and see if they would rather keep it or sell it off and let Magna deal with the issues.

[web_captain]

Originally Posted by nadepalma

GM hits the brakes on Opel deal; no signing with Magna this week
Automaker's board to discuss sale to Magna on Nov. 3
October 23, 2009
FRANKFURT (Reuters) .................................................. .....
He was referring to German Economy Minister Karl-Theodor zu Guttenberg's request to GM -- prompted by European Union concerns about promises of German state aid -- to confirm that the carmaker chose Magna for business and not political reasons......

Ah, ah, ah! ... not political reasons ....
Germany's gov.t ordered, yes practically ordered GM.NA to consider only and only a deal with Magna: for EU this is a blackmail due to political reasons.
Oh yes, first words from EU are soft, the harder ones will follow.
Why?
Just to let GM.NA the time to consider its suicide in the Magna deal for Opel.
However everything is possible at this time, considering the 'power' of GM.NA management

[70eldo]

Originally Posted by flctinman

why didn't they do to opel what they did in the u.s.? they could have shut them down for 6 months and cut to the bone like they did here. i guess this is what happens when a countries WORKERS stick together rather then hope for the worst on their neighbors and communities like americans do. so-called free trade agreements in america are obviously not free nor are they equal and are slowly tearing america apart. ross perot warned us all about that 'big sucking sound you hear will be jobs going south' when nafta was thought of but no-one listened......

Ironically, that is exactly what the german politics initially suggested Opel should do

[rueben44]

Well I think we all new something was going to happen to halt this deal but what GM is aiming for I really don't know. They do have some some leverage because they keep kicking the ball.

[boz2730]

What a cluster f#@%.

[YupYupYup]

Originally Posted by BlackGTP

An interesting game GM is playing with Opel. I wonder what their goal is, my hope is that they are trying to keep it and/or keep it out of the Russian's hands.

There is more here than meets the eye...I said all along that Opel was just a show for the auto task force...But Lutz and Co. really did not want to part with it...Just look at the product pipeline that is being used for other GM brands...

Keep it!