GM Signs Off on Sale Of Opel Unit to Magna

By Jeff Green, Chris Reiter and Andreas Cremer

Bloomberg

DETROIT — General Motors agreed to sell its Opel unit to Magna International on Thursday, accepting the German government’s preference over a financial investor that the U.S. carmaker had favored.

Magna, Canada’s biggest auto-parts maker, and its Russian partner Sberbank will acquire a 55 percent stake in Opel, Detroit-based GM said in a statement. GM, Magna and Germany resolved disputes over Opel’s access to GM intellectual property and financing issues in the past two weeks, according to a person familiar with negotiations.

GM, having emerged from bankruptcy in July, had preferred a rival bid by Brussels-based RHJ International and considered keeping the money-losing unit. Chancellor Angela Merkel’s government, which offered 1.5 billion euros ($2.2 billion) in loans to keep Opel afloat, chose Magna and Moscow-based Sberbank as the preferred bidder in May to help preserve German jobs.

“I know that a difficult path still lies ahead for Opel,” Merkel said at a press conference in Berlin. The deal offers a model for how companies and workers can work together to “find ways out of a crisis affecting the entire auto industry.”

Merkel’s government, facing Sept. 27 federal elections, has a say in the decision because it offered 4.5 billion euros in loan guarantees to back Magna’s bid. Magna’s proposal foresees a linkup with GAZ, the Russian carmaker that said in May that it wants to produce 180,000 Opel cars at its main Russian site.

Opel and its sister Vauxhall brand in the U.K. have lost market share in Europe, accounting for 7.6 percent of industry sales in the region in the first half of 2009, compared with 8.5 percent in all of 2006.

Germany asked GM to cede a majority stake in Opel to outside investors earlier this year in exchange for loans the unit needed to survive. GM, which has run Ruesselsheim, Germany-based Opel since 1929, turned over control to the trust before filing for bankruptcy in June.

Opel’s trustees are scheduled to meet in Berlin this afternoon to review the transaction.

Magna rose as much as 5.6 percent to C$50 and traded at $49.33 as of 10:29 a.m. in Toronto. RHJ slid as much as 19 cents, or 3.7 percent, to 4.94 euros and traded at 5.06 euros in Brussels trading.

Federal and state governments in Germany provided the 1.5 billion-euro short-term loans for Opel when officials designated Magna as preferred bidder. About 1.05 billion euros of the lending had been used as of Aug. 27, a government report showed.

Labor unions in Germany also favored Magna’s bid over RHJ’s. Opel employs about 25,000 people in Germany, making up almost half of GM’s 55,000-strong European workforce, including the bankrupt Saab division that the U.S. carmaker is selling outright.

“GM needs to focus its resources on the areas it feels it can best benefit from economies of scale, and focus on those: Asia, South America and North America,” said Michael Robinet, a market analyst from CSM Worldwide in Northville, Michigan. GM can still be “active in the European market as an importer.”

John Smith, GM’s top negotiator on the Opel sale, had called RHJ’s offer a “simpler proposal.” GM had expressed concern that its intellectual property in Russia would be at risk under an earlier offer from Magna.

GM’s endorsement of Magna is a boon to Merkel, who has repeatedly said she prefers the car-parts maker’s plan. Merkel trusts that Magna will help save more of the Opel jobs in Europe’s biggest economy at a time when unemployment remains voters’ No. 1 concern.

The Chancellor’s handling of Opel, especially her refusal to consider alternative rescue plans, has earned her criticism from analysts. The government’s performance has been “anything but a showpiece of shrewd bargaining,” said Uwe Andersen, a politics professor at the University of Bochum, the western German city where Opel employs about 5,300 workers.



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Berlin/Vienna - Giant US carmaker General Motors Co (GM) announced plans on Thursday to sell off a majority stake in its European offshoot Opel to a consortium led by the Canadian-Austrian auto parts group Magna International. The decision on GM's European subsidiary forms part of a major global restructuring of the Detroit-based auto group and was endorsed by the German government-backed trust overseeing Opel's day-to-day affairs.

"GM is confident that the Magna-Sberbank proposal represents the best possible solution to provide a sustainable feature," said GM chief negotiator and vice president John Smith at a press conference in Berlin.

The announcement came after GM held a two-day board meeting in Detroit, and follows months of uncertainty surrounding the fate of Opel, which has about half of its 50,000 European workforce in Germany.

German Chancellor Angela Merkel welcomed GM's decision, which she said was "in line with the wishes of the federal government" and represented "a new beginning for Opel."

The deal, under which all four German Opel factories are to remain in operation, brought relief to Merkel less than three weeks before Germany's general election.

Nevertheless, under the Magna-led plan more than 10,000 jobs are expected to be lost across Opel's European operations which includes Britain's Vauxhall brand as well as units in Spain, Poland and Belgium. About 3,000 Opel job are projected to be cut in Germany.

Negotiations over the Opel sale were set to continue, according to Smith, with a final agreement between GM and Opel not expected to be completed until after the September 27 election, possibly at the end of November.

Under the Opel deal, the Magna-led consortium is to hold a 55 per cent stake in the so-called New Opel with GM retaining 35 per cent holding. A further 10 per cent is to be held by the Opel workforce.

Magna's 55-per-cent share of Opel is to be split half-way with Russian state-owned Sberbank, part of the consortium alongside Russian carmaker Gaz.

The deal represents a major step for both Magna and Sberbank, neither of which have ever run a business involved in building motor vehicles.

While Magna's management declined to comment on GM's announcement, former Austrian premier Franz Vranitzky, an independent Magna board member, told the German Press Agency


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General Motors Co. announced Thursday that Canadian auto parts company Magna International and its Russian partner, the Russian bank Sberbank, are the winners of the drawn-out auction for a majority stake in its Germany-based Adam Opel division. Here is a chronology of events culminating in Thursday's announcement:

Sept. 10: General Motors said in a news release that its board of directors has agreed to sell a 55 per cent stake in Opel to the Magna/Sberbank consortium. GM will retain a 35 per cent stake and employees will hold a 10 per cent stake.

“We thank all parties involved in the intensive process of the last few months – especially the German government – for their continued support that enables this new venture,” GM chief executive officer, Fritz Henderson, said in a statement.

Sept. 9: After a two-day board meeting, GM shakes up its management and dispatches its chief negotiator on the sale of Opel to Berlin to announce GM's pick of a buyer, people familiar with the proceedings say.

Sept 8: The German government calls for clarity from General Motors on its long-term financial strategy for Opel should the U.S. automaker reverse course this week and decide to keep Opel instead of selling it.

Sept. 1: Private equity investor RHJ International improves its offer.

Aug. 24: Sources with knowledge of the deliberations say GM is considering a plan to raise funding to keep Opel instead of selling the company.

Aug. 22: GM board meeting fails to pick a buyer for Opel.

Aug. 19: German government says could provide 4.5 billion euros in state aid for Opel without help from other European governments if GM chooses Magna as the buyer.

Aug. 11: German Chancellor Angela Merkel says she is ready to intervene personally to support Magna's bid.

July 28: Magna offers to increase the upfront capital it would invest in Opel.

July 23: GM agrees to continue detailed talks with both Magna and RHJ International. Chinese automaker BAIC says next day it has dropped out of the running.

July 20: GM receives binding takeover offers for Opel from Magna, RHJ and Chinese carmaker BAIC.

June 11: Germany says it is still in talks with other potential investors on Opel.

May 30: Germany agrees a deal with Magna, GM and the U.S. government to save Opel from the bankruptcy of its U.S. parent.

May 22: Magna emerges as favourite after German officials say it submitted a better plan than rival bidders.

May 20: GM Europe says three bids have been made; Fiat confirms it made a bid and a source says private equity investor RHJ International also bid.

May 13: Germany rules out temporary Opel nationalization.

May 12: Russian carmaker GAZ confirms its interest in a joint venture with Opel and Magna.

April 28: Canadian auto parts maker Magna presents outlines of an offer for Opel.

March 4: GM Europe head Carl-Peter Forster says Opel could slash 3,500 jobs and re-launch as an independent company.

November, 2008: Opel asks Germany for state loan guarantees.