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GM Board Will Sell Majority Stake in Opel/Vauxhall to Magna International and Russian Sberbank

The German government supports the deal with financing.

by on Sep.10, 2009

The Federal Chancellor gets her way in time for tough election this month.

The Federal Chancellor gets her way just in time for tough election she is facing this month.

General Motors has just announced that its Board of Directors supports a bid from the consortium of Magna International Inc. and Sberbank to buy a majority stake in its European Opel/Vauxhall operations.

The other finalist in the bidding, Belgian-based private equity firm RHJ International, was not favored by the German government since it thinks massive job losses will result.

In a statement the GM says, “several key issues will be finalized over the next few weeks to secure the binding agreements, including the written support of the labor unions to support the deal with the necessary cost restructuring for viability and the finalization of a definitive financing package from the German government.”

After months of negotiations with numerous special interest groups, labor unions and European governments,  GM is now saying, “definitive agreements should be ready to sign within a few weeks, with closing to follow within the next few months.”

Under the  tentative deal, Magna/Sberbank will purchase 55% of the New Opel. GM will hold a 35% stake, and employees will be getting a 10% share.

Several contentious issues were not covered in the statement, including the role of Chevrolet in Russia and expanding Asian markets, as well as the intellectual property rights for the small car engineering that Opel currently provides for GM.

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Opel Soap Opera Continues

As GM Board Meets, German Government threatens to call Opel loan.

by on Sep.09, 2009

As the flagship Insignia celebrates its first birthday, Opels future remains murky.

As the flagship Insignia sedan celebrates its first birthday, Opel's future remains murky.

When we last left our beleaguered European auto company, Adam Opel, the German Chancellor had politicized the proposed sale by calling for General Motors Company to sell its loss-making European subsidiary to a Russian backed consortium headed by Magna International.

The other finalist in the bidding, Belgian based private equity firm RHJ International, was not favored by the German government since it thinks massive job losses will result.

Since the government is facing national elections at the end of this month, and is under attack for its economic policies, it is not surprising that the government is playing for votes by trying to force the Magna deal on GM, which is favored by Opel’s labor unions.

In it’s latest, and thus far ineffective, attempt to force such a sale, the German government said this morning  it would call the €1.5 billion bridge financing loan in November that is keeping Opel afloat, and it would not advance another €3 billion already promised if the sale didn’t go to Magna.

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Opel Sale Cliffhanger Continues

German politicians facing re-election take their case for Magna to the media again.

by on Aug.24, 2009

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German Chancellor Angela Merkel escalated the row on German television this weekend.

The General Motors Company board of directors met last Friday to discuss the two bids for its loss-making European operation Adam Opel, and made no decision. One bid under consideration is from a consortium led by Canadian parts maker Magna International (MGa.TO), Russian automaker Gaz with Russian financing from Sberbank. The other bid is from a Belgian-based private equity investment group called RHJ International (RHJI.BR).

As TDB has reported, the RHJI bid is a cleaner two-party deal. It is easier to implement and gives GM a larger share of the “New Opel.” It also apparently offers a Humpty Dumpty provision, which would allow GM to repurchase Opel in the future if its fortunes improve.

On the eve of the GM Board meeting, the German federal and state governments said that they would provide more than $6 billion in loans for a Magna deal even though it would eliminate some 3,000 jobs, but none for a RHJI takeover, which is presumed to require much larger job losses. The German federal government is also considering a $2 billion line of credit that Opel says it needs to stay open into the fall of this year. German Chancellor Angela Merkel even reportedly asked  the U.S. president to urge GM to make a decision.

However, after the GM Board met and no announcement was made, German politicians took to lobbying through the media over the weekend. The political climate has now become so overheated that senior German Government officials awoke this morning to union threats of shutting Opel down to force a GM decision. A strike would be devastating as Opel continues to struggle sell cars in the depressed European economy.

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General Motors Board Meets Today on Opel Sale

GM remains reluctant to sell its European operations to what is a Russian financed bid.

by on Aug.21, 2009

To keep running Opel needs cash not hydrogen.

To keep running Adam Opel needs more cash not hydrogen.

General Motors Company’s  board of directors was schedule to meet today for an update on the proposed deals to transfer control of its European operations, including Opel, to a group headed by Magna International or a private equity investment group called RHJI.

As TDB previously reported, the RHJI bid is a cleaner two-party deal. It is easier to implement and gives GM a larger share of the “new Opel.”

Opel is vital to GM’s future product development plans and it is clear that GM is reluctant to sell it to what is a Russian financed bid. Speculation has it that the Russians want control of Chevrolet in Russia, which is currently expanding globally at GM. The Opel and Chevrolet product lines compete directly in the types of small and medium-sized vehicles that are key in emerging markets such as Russia, Eastern European countries, as well as India and China.

Officials from Magna confirmed privately that its representatives and its Russian partner Sberbank, had met with GM officials in Detroit on Thursday, “It was a relationship building exercise,” said one Magna official, who asked not to be identified. “There were not any negotiations,” he said.

No Bid Needed!

No Bid Needed!

GM spokesperson Gerri Lamas declined to comment publicly on the agenda for board of directors meeting. “We don’t talk about the board of directors meetings,” she said. The board also met outside Detroit two weeks ago to install its new chairman Ed Whitacre.  

However, other GM officials confirmed that the board would meet Friday by telephone to discuss the ongoing negotiations with Magna.

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Politics Intervenes in Adam Opel Sale?

No surprise German Chancellor says publicly she prefers Opel.

by on Aug.14, 2009

tk

Facing elections, German Chancellor Merkel has a clear preference for Russian-backed Magna's bid.

The head of the German government has now weighed in on the debate over what company General Motors sells its Adam Opel subsidiary to. German Chancellor Angela Merkel said this morning in Russia that she had a clear preference for the Russian-backed bid of Magna to take over controlling interest in GM’s loss-making European arm. Merkel was meeting with Russian President Dmitry Medvedev.

The public statement confirmed media accounts that said the German government, facing elections next month, thought the Magna bid was the best way to preserve German jobs. In Europe more than half of Opel’s 50,000 employees work in Germany.

The Opel matter has devolved into two buyer choices: The Canadian auto conglomerate Magna, which has strong European and German ties, or an investment group know as RHJI.

It is by most accounts a complicated negotiation, as we have noted before, since it will require the agreement of labor unions, regional and federal governments, financial  institutions and regulators, among others, to broker a deal to save Opel. And GM needs to save Opel engineering if the reorganized company is to have a good shot at surviving.

The Merkel statement followed a blog post this morning by GM’s chief negotiator that once again said the Magna deal with Russian partner Sberbank was not a sure thing. So the communications battle continues.

“Yesterday was a pretty busy day in the media, with many outlets reporting that Magna/Sberbank and General Motors had reached an agreement regarding Opel.  At the risk of repeating myself, that’s just not the case,” said John Smith of General Motors.”

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GM Says Press Reports on Opel Sale Wrong

No deal with Magna says chief negotiator. RHJI bid better?

by on Aug.06, 2009

The negotiations with the Russians appear to be going in circles.

The negotiations with the Russians appear to be going in circles.

In a GM Europe blog post earlier today, the negotiator on the sale of Opel said he needed to update the actual status after several days of talks with both of the final bidders. John Smith, a GM Group Vice President, characterized the media coverage as both “extensive” and “sometimes misleading.”

Smith said the “best” and final offers were received by GM from Magna and RHJI on July 20th The preliminary findings were then compiled and shared with the German government, other European governments, the European Commission and the Opel Works Council, among others. A week of talks then ensued with both bidders “to clarify certain aspects of each company’s proposal and to attempt to resolve, as necessary, important issues the final offers contained.”

I surmise that various self-interested parties were leaking to the press in an attempt to sway the outcome. For the record Smith only says “Press reports have tended to exaggerate the state of progress, a few even suggesting the deal is done and that Magna has been selected. That’s not the case.”

So where is the sale?

As TDB previously reported, the RHJI bid is a cleaner two-party deal. It’s easier to implement and gives GM a larger share of the new Opel.  Smith confirms that most of the time was spent negotiating with the Magna/Sberbank team, which could, of course, lead some observers to conclude that the deal was heading that way.

A giant complication, not discussed, is apparently the Opel Works Council, whose political leanings are causing it to push for the Russians, even though the Russian deal will cost Western Europe more job cuts than the RHJI bid.

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GM’s Opel Negotiator Tips Hand or Clears Air?

We think the company wants to sell Opel to RHJI despite German federal and regional political pressures.

by on Jul.30, 2009

Presumably, Forster, who is running GM Europe, has a future looking after Opel.

Presumably, Forster, who is now running GM Europe, has a future looking after Opel.

The chief negotiator for General Motors on the sale of Opel/Vauxhall in Europe published a blog post yesterday that in my view foreshadowed what GM thinks is a desirable outcome for the impending decision. It is a canny piece of communication in the midst of a political mess.

John Smith, a GM Group Vice President who normally looks after GM’s future product plans, is leading an effort that he says has always been about finding the “best solution”for Opel/Vauxhall. And he points out that, thus far, GM has not picked a favorite in spite of such assertions by some media outlets. For what it’s worth, in my dealings with John over the years, including when I was competing against him, I have found him to a straight talking man of his word.

Two different choices

The Opel matter has devolved into two buyer choices: The Canadian auto conglomerate Magna, which has strong European and German ties, or an investment group know as RHJI.

It is by most accounts a complicated negotiation, as we have noted before, since it will require the agreement of  labor unions, regional and federal  governments, financial  institutions and regulators, among others, to broker a deal to save Opel. And GM needs to save Opel engineering if the reorganized company is to have a good shot at surviving the brutal car wars of this decade.

If this was a horse race, not subject to fixing, I’d handicap it this way:

RHJI is the clear favorite since is a venture capital group that will look to sell off all or most of its stake in Opel for a profit as soon as possible. No doubt GM will negotiate favorable terms for itself on the buy back. This is completely consistent with GM’s, entirely rational, desire to protect its product a plan going forward, which Opel engineering is key to.

Magna is a long shot. It’s a potential competitor to GM globally, as well as a current supplier, and the Russian financing presents possible conflicts in a market that GM is expanding in.

But the political aspects mean this is no ordinary horse race, so such simple reasoning might not apply.

Here’s how Smith views the race since he says both bids being developed “bring both opportunities and challenges.”

First the Magna bid

Smith says Magna “is clearly preferred by several politicians and the Labor Bench.”

However “the bid presented to GM varied from the negotiations we had in the previous weeks and contained elements around intellectual property and our Russian operations that simply could not be implemented. GM has partners in other parts of the world who have joint ownership of these assets…we simply could not execute the deal as submitted.”

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