German Chancellor Angela Merkel met this evening at the Chancellery with German and U.S. government officials, representatives from General Motors Europe and Opel’s potential buyers. Bidders for the cash starved Opel brand include Fiat SpA, Canadian autoparts supplier Magna International Incorporated, U.S. financial firm Ripplewood Holdings LLC, and possibly Chinese carmaker Beijing Automotive Industry Corporation.
GM spokesperson Chris Preuss told TDB, “We’re hoping Merkel will be confident enough with the bids to give GM a bridge loan to help until we can negotiate the sale.”
GM desperately needs a €1.5 billion loan just to keep its European operations running during the next couple of weeks; and is attempting to sell off all or part of Opel to help its global restructuring. A GM bankruptcy is expected at any time now in the United States, and it is complicating its ability to save its overseas operations. About half of GM Europe’s 50,000 employees work at Opel in Germany. Vauxhall has 5,000 employees at two plants in England.
In order to facilitate the sale and help secure government loans, Opel’s supervisory board has approved a GM Europe plan to place its European plants, sales operations, patents and other assets, debt-free under German-based Adam Opel GmbH, Preuss said. GM’s Saab unit, currently in receivership in Sweden, is not part of this restructured, but cash short, Adam Opel.
There are “major questions” with all of the bids, German Economy Minister Karl-Theodor zu Guttenberg said today. And he would not rule out insolvency. In Europe, insolvency is similar to Chapter 7 of the U.S. Bankruptcy Code, which is not a restructuring of debt, like the one Chrysler is going through under Chapter 11, but simply a sale of assets and liquidation.
Senior GM officials have previously told TDB that a European insolvency is fraught with complexity and the risk of survival is exceptionally high.
GM’s negotiating position without government cash to keep Opel afloat is, obviously, weaker. GM would prefer to keep the race open so it can play the bidders off of one another. (more…)