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GM blog lifts hood on power struggle over Opel

By Paul Taylor
July 31, 2009

cfcd208495d565ef66e7dff9f98764da.jpgIt’s not often you get to lift the hood and watch a power struggle going on in the engine room of General Motors. But the vice-president of GM Europe, John Smith, has just provided tantilising details of the arguments over the rival bids for Opel/Vauxhall, the main European arm of the fallen U.S. auto giant. Smith is the chief negotiator on the sale of Opel.

In a blog apparently intended to reassure Opel staff, but accessible to the public, he insisted GM had not specified a preferred bidder. But he made clear his own preference for the bid from Belgian financial investor RHJ International, which is loosely related to U.S. private equity fund Ripplewood, over the offer by Canadian-Austrian car parts maker Magna and its Kremlin-backed Russian partner Sberbank.

Smith’s post is entitled “Clearing the Air” and was ostensibly written to clarify GM’s intentions and dispel erroneous reports ascribed to interested parties. But his account shows just how poisonous the atmosphere appears to be between GM and Magna, and GM and the German government, which backs Magna’s bid. It also suggests that the air is not too clear within GM’s top management either.

Specific to the Magna bid, which is clearly preferred by several politicians and the Labor Bench, the bid presented to GM varied from the negotiations we had in the previous weeks and contained elements around intellectual property and our Russian operations that simply could not be implemented…

The bid from RHJI is completed and would represent a much simpler structure and would be easier to implement. It would require less monetary participation by the government and would keep our global alignments solid, while still creating an independent Opel/Vauxhall organization in Germany. This remains a reasonable and viable option to be considered as the very difficult issues around the Magna negotiations continue to be worked.

The following day, (July 29) Smith felt the need to add an update denying that GM was seeking to buy back control of Opel at a later date, or that it had asked the U.S. Treasury for financial assistance to restructure Opel. The former is strange since several sources have said a buy-back option is a key feature of RHJ’s offer and not of Magna’s.

So what is going on here and why did the chief negotiator feel the need to explain himself in semi-public in this way? One can only speculate, but one plausible theory is that GM’s top management is split. This would not be surprising since the U.S. government now holds a controlling stake in the shrunken GM that emerged from bankruptcy, and Washington is probably being lobbied heavily by Berlin to support the Magna bid. A senior aide to Chancellor Angela Merkel discussed Opel with the U.S. Treasury on Wednesday.

If GM were to choose RHJ in defiance of Berlin’s clearly stated wishes, it would spark a crisis with political ramifications just as Germany is entering the final phase of campaigning for a Sept. 27 general election. Might the Obama administration not lean on GM’s top management in Detroit to avoid being branded as a potential job-killer in Germany? If so, Smith’s blog may be a doomed effort to make business arguments prevail over politics.

Comments

I am sure that it is intellectual property that is the sticking point. GM’s one company policy means that Ruesselsheim tech center pretty much mirrors the Warren tech center. In many ways due to the fact that Germany dealt with Europe with it’s various laws cultures and languages, in some respects Ruesselsheim tech center has more potential in a global environment than it’s sister in Warren.
I do feel that it is in the interest of the potential buyer to win the hearts and minds of it’s future employees.
Initially and into the future the new GM will still share common platforms and technology with what is effectively it’s new partner.
This is probably why they found that the rejected offer from Shanghai so interesting. GM operations in Asia are it’s growth market.

 

The technical and researching cooperation between GM and Fiat started many years ago.
I do not understand the reason of the German Government to support oonly the “Magna solution”.

Posted by christian ferrari | Report as abusive
 

I wanted to clarify what Drivingconversations.com is because Mr. Taylor made it sound like it was an internal website (accessible for the public):

Drivingconversations.com is a corporate / executive blog, an effective way of getting our perspective across (rather than doing many one-on-one interviews) while driving a more robust conversation with the many audiences that have an interest in GM…our employees, dealers, suppliers, media and other interested parties who closely follow our business here in Europe and around the world. It is 100% public.

http://drivingconversations.gmblogs.com/ 2008/05/does-the-world-need-another-blog .html

Karin Kirchner
GM Europe Manager, Corporate Communications

 

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