Canadian automotive parts supplier Magna International has been chosen over Italy’s Fiat by Germany’s government to take over struggling General Motors subsidiary Opel. Designed to prevent Opel from losing short-term operating cash due to a GM bankruptcy, Germany has agreed to provide $2.1 loan to Opel.
“Opel is rescued for now,†GM Europe President Carl-Peter Forster said.
Under the plan backed by German Chancellor Angela Merkel, Sberbank, a Russian bank owned mostly by the government, will hold 35 percent of Opel, as will GM. Magna, which has received financial funding from Sberbank, will acquire 20 percent. The remaining 10 percent of Opel will be owned by its employees.
Tomorrow, Magna, based in Aurora, Ontario, will provide 300 million euros to Opel, according to co-CEO Sigfried Wolf. Magna expects to make a formal deal, including the final contract, with GM within four to five weeks, Wolf told reporters.
Sberbank could provide up to 700 million euros in investments. Eventually, Russia’s OAO GAZ will build up to 180,000 Opel-engineered cars in its Nizhny Novgorod, Russia, assembly plants. The Russian interest comes because the deal offers “fairly low” cost access to German technology. OAO GAZ will apparently reallocate money intended to continue building a sedan based heavily on the last-generation Chrysler Sebring.
“Such an asset will make it possible to restructure the automobile industry in Russia,†Sberbank CEO German Gref said in an interview with Vesti-24 state television.
Opel will be shielded from GM’s bankruptcy filing today. The deal also includes GM’s United Kingdom unit, Vauxhall, as well as its Russian Chevrolet operations. Vauxhall and most Russian Chevrolets were designed and engineered by Opel.
Job cuts
Rumors about the level of job cuts abound. Though Magna had said early on that it would limit job cuts, even the German government eventually agreed that personnel would have to be lost. Germany’s largest union, IG Metall, says it will talk with Opel “as soon as possible.”
Reports out of Germany indicate anywhere from 2,600 to 11,000 jobs will be cut in Germany and across Europe. The fate of Opel’s U.K., Poland, Belgium and Spain assembly plants is up in the air. The German backed-initiative will apparently protect domestic plants.
Opposition in Germany
Conservative German economics minister Karl-Theodor zu Guttenberg voiced his concern over the deal. He claimed that Germany was meddling too much in Opel’s affairs for such a short-term solution.
“The concept is not without risks for the state and the guarantees it has promised for Opel,†Guttenberg told Germany’s Welt am Sonntag newspaper yesterday.
Guttenberg has offered to resign, but Merkel has urged him to stay in his position.
Fiat loses, moves focus to Chrysler
Fiat, considered Magna’s largest competitor in the bidding for Opel, lost out on the bidding. CEO Sergio Marchionne, who recently won the bidding for Chrysler, was intent on creating the world’s second-largest automaker. Marchionne’s goal of selling 6 million cars annually across the globe really needed Opel’s 2 million.
Most analysts have agreed that Fiat’s bid made more economic sense.
“It’s going to be difficult to have a real Plan B for Marchionne,†Pierluigi Bellini, an automotive analyst at Global Insight in Milan, told Bloomberg. “Opel was a good option, the best one in Europe, especially because it’s a bargain sale.â€
Fiat was not seeking government help, unlike Magna, which tapped into the Sberbank. Italian Prime Minister Silvio Berlusconi’s government was “under fire” in Rome, according to the New York Times, over losing the bid.
Marchionne says he will continue to pursue GM’s Swedish unit, Saab , as well as its Latin American operations. A Saab winning bidder is expected within the next few weeks.
Italian finance minister Giulio Tremonti told Italian state television, “our industry went to Berlin to play soccer in good faith and by the rules.†Instead, “they started playing rugby and used their hands. Governments came onto the pitch, the German government, the Russian government.”
