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.”
Opel is vital to GM’s future product development plans and it is pretty 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. 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 China.
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.
“We did receive another offer from Magna/Sberbank yesterday morning and are reviewing it now. We’ll update the comparisons we made previously to the attractive proposal submitted by RHJI on July 20 and prepare for a review with GM’s Board of Directors,” said Smith.
One of the reasons Magna wants Opel is so that it can control the sale of its component parts. But such a strategy is not without risks, admitted Co-Chief Executive Officer Don Walker during a conference call with analysts and reporters. He said a “firewall” would be erected between the auto components business and Opel to ensure that trade secrets would not be exchanged. Still, some existing customers might not use Magna because of such concerns and the fact that Opel competes with them.
Smith said that he asked the German automotive task force to provide GM with an outline of the terms and conditions of the financing package they and other European governments would make available to “NewOpel.”
“We expect to receive this outline soon, which will round out the materials needed for the GM Board review,” Smith said.