GM is ready to keep Opel if EU blocks Magna deal

[nadepalma]

GM is ready to keep Opel if EU blocks Magna deal, report says
Paul McVeigh
Automotive News | October 19, 2009 - 4:11 am EST

MUNICH -- General Motors Co. is ready to keep control of Opel if the European Union blocks the division's sale to Magna International Inc., The Wall Street Journal reported Monday, citing people familiar with the matter.

GM still prefers a sale to Canadian supplier Magna and its Russian partner Sberbank but GM executives are prepared to move to a Plan B if the deal falls through, the newspaper reported.

The plan would mean GM keeping control of Opel and implementing deeper restructuring actions than Magna is planning, including closure or sale of an Opel car factory in Germany, the newspaper said.

Insolvency possible

GM still aims to finalize the sale of Opel unit to Magna and Sberbank, Russia's largest commercial bank, midweek, The Wall Journal Street Journal said, but if forced to go alone, GM would fund Opel's restructuring by seeking government support or by putting Opel into insolvency.

Under intense pressure from Germany where half of Opel's 50,000 employees work, GM last month agreed to sell Magna and Sberbank a 55 percent stake in Opel but the agreement has not yet been finalized.

The European Commission is concerned about a 4.5 billion euro ($6.71 billion) aid package offered by Berlin to Magna to help restructure Opel.

On Friday, EU Competition Commissioner Neelie Kroes wrote to Germany's Economics Minister Karl-Theodor zu Guttenberg and said GM should be allowed to reconsider the bidding process because of indications that an offer of German state aid was made only to Magna's bidding group.

Kroes said such a precondition for aid would be incompatible with EU state aid and internal market rules.

MORE AT AutoNews.com

[jbartley]

i still stand by my orginal belief that what's best for Opel and GM, is for GM to retain complete control and cut back heavily on Opel employees and cut a factory or two.

Magna would not do enough to stem Opels losses, and Opel is an asset to GM it cannot afford to let slip away.

[ByTheLake]

Interesting set of options. I didn't realize that the Epsilon engineering moved from Germany.

I wonder why the EU concerns were not stated earlier? It seems a bit late.

[Bravada]

Just close Bochum and give everybody a reason for celebration!

[rueben44]

I will not get my hopes up but I really hope this pans out.

[zete]

I wonder if some in the EU are figuring "better the devil you know than the devil you don't".

Selling Opel means that the unions, governments, etc. all have to create new relationships with Magna and their partner. This is a tad more complicated than simply dealing with GM Europe.

Furthermore, I'm sure some in the EU are starting to realize that Magna is going to be more interested in their self-interest as opposed to that of Europe. I think GM has been way too kind over the years to European interests and not hard enough on the business to ensure viability. There was neglect here, and inattention in Europe.

If Magna does end up with Opel the issue that I see is that Magna isn't going to buoy Opel with funds from the rest of its operations, not long term. Thus, Opel has to turn a profit and quickly. GM, being a massive multinational, was able to float Opel for years. And it's obvious whoever ends up owning Opel will not be floating it anymore. It has to be profitable in its own right.

Ultimately, the longer we wait to see a deal signed re. Opel the more likely no deal will be signed.

[Rocket 88]

Originally Posted by jbartley

i still stand by my orginal belief that what's best for Opel and GM, is for GM to retain complete control and cut back heavily on Opel employees and cut a factory or two.

Magna would not do enough to stem Opels losses, and Opel is an asset to GM it cannot afford to let slip away.

Despite the financial hardship GM would face keeping control of Opel, I can't imagine what they really gain by selling it to Magna and a Russian Bank.

[Bravada]

Furthermore, I'm sure some in the EU are starting to realize that Magna is going to be more interested in their self-interest as opposed to that of Europe

It's not about Magna here. It's about Germany effectively funding its inefficient industry over other countries' investment. The EU rules exist for the very reason of prevention of this potentially contagious and disastrous practice. The whole idea behind EU was to save heaps of money European governments spent on that and allow faster growth. Germany has not been a growth economy for a long time, but the UK, Spain and Poland have been and want to continue to be rather than splurge on competing with Germany over the assembly of a compact car or supermini.

[Quest]

Spanish workers reject Magna offer
Oct 19, 8:07 AM EDT

MADRID (AP) -- A Spanish labor representative says unions have rejected Magna's latest offer concerning the future of an Opel plant targeted for job cuts and will vote on calling a strike.

http://hosted.ap.org/dynamic/stories...MPLATE=DEFAULT

[SigEpCutlass]

The EU should block this due to their competition rules for member countries. Germany pretty much said you want the money, the gun to your head says to pick Magna or else.

[rsbaker]

Originally Posted by jbartley

i still stand by my orginal belief that what's best for Opel and GM, is for GM to retain complete control and cut back heavily on Opel employees and cut a factory or two.

Magna would not do enough to stem Opels losses, and Opel is an asset to GM it cannot afford to let slip away.

I absolutely agree! Short term pain will result long term prosperity. GM does need to keep control of Opel if for no other reason than to keep the Intellectual property away from the Russian GAZ.

[GMJoe]

GM had a deal worked out with RHJ that they said was more workable than with Magna, with an option to buy back a major part of Opel in the future.

That deal is a possible fall back position if GM does not opt to keep Opel outright, should the Magna deal fall through..

[web_captain]

UE will surely block any final agreement with Magna & russians, because of disregard of its rules.
It must be clear that practically Germany's gov.t has blackmailed GM.NA and since every other solution is better fo GM, it's a nonsense to have GM.NA below the 50% in Opel
At this point two solutions could be immediately possible:
- the one as already mentioned in this thread as GM.NA single owner
- or an alliance with another carmaker: in this case it should be possible to get loans from Germany's gov.t. Should the carmaker be FIAT, on a parity base with GM, italians could get immediately other loans from a pool of main eu banks

[ARCANGEL]

Why not keep Opel and slowly turn them into Buick in Europe. Rebrand Opel and shun it's problems for sales in Europe. Bring Buick back to Europe so it's presence can expand there. Make the new regal he jump off point! Start fusing both Opel and Buick. Bring the European aspects to America and the American aspects to Europe. Win win.

[eaton53]

GM still prefers a sale to Canadian supplier Magna and its Russian partner Sberbank

I don't think this is an accurate statement...