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.
Opel labor leader Klaus Franz, Reuters reports, said the union was prepared to take “spectacular measures” if GM did not make up its mind soon. “We have been calm so far, listened diligently and made comments, but that is over now,” Franz said on German radio on Monday.
About half of Opel’s 50,000 European workers are employed in four large German manufacturing plants.
Merkel, whose government is facing elections next month, escalated the row on German television this weekend when she openly pushed for a quick GM decision favoring Magna. Federal economics minister, Karl-Theodor zu Guttenberg, then said in a newspaper interview that the ministry has provided all the needed information to GM for a decision to be made.
As it stands now, General Motors officials are scheduled to meet with the ministry, which is the government’s lead on the sale, once again this week. Negotiations have dragged on since last spring.
Merkel had previously announced her support for Magna. Two weeks ago in Russia, she said that she had a clear preference for the Russian-backed bid of Magna. Merkel was meeting with Russian President Dmitry Medvedev, who also supports the Magna/Russian takeover.
That event caused John Smith, GM’s chief negotiator on the sale, to issue a blog posting that said what was being reported by the media “simply was not true.” As of this afternoon, Smith has not issued any further blog updates and GM is not commenting.
It’s probably a good idea to keep quiet until after the election.