Driving a hard bargain on GM’s Opel
Magna says it has reached an agreement in principle to buy a controlling stake in GM’s European unit. However, GM says it is going to think about the revised offer from the Canadian auto parts maker. It wants more details of the government financing package on offer before it can make up its mind.
Even though this contest has been one-sided from the start, GM and Smith have stuck resolutely to their guns in talks with not only the potential bidders but also the German government — resisting its attempts to bully them into accepting the Magna bid to the last.
Berlin has unashamedly skewed the race towards Magna at every step of the way — supporting its Russian-backed consortium in the belief that fewer jobs will be lost than under the rival takeover proposal of Belgian private equity group RHJ International favoured by Smith and GM.
With a general election looming on Sept 27, Merkel is desperate to show voters that her government is protecting local jobs at a time when the economy is fragile.
The “auction” involving Magna, RHJI — and in the early stages Fiat and some Chinese buyers — has driven up the price GM is getting for Opel to a reported 500 million euros. However, a key ingredient of Magna’s offer are the loans being made to Opel — totalling 4.5 billion euros — guaranteed by European governments.
Magna, along with Russian backers Sberbank and carmaker GAZ will get a 55 percent stake in Opel.
Smith has been upfront about his qualms over the Magna offer in his blog. His basic point is that RHJ’s offer is simpler, requires less government-backed funding, and does not raise any tricky questions about intellectual property rights like Magna’s Russian-backed deal.
Regular readers of the blog (http://drivingconversations.gmblogs.com/) will be eagerly awaiting the next posting from the man who has shed more light on the progress of the talks than anyone else involved.
The GM negotiator is probably fighting a losing battle, but the longer he resists, the more pressure there is on Merkel to get assurances from Russia on the issues he has raised.
Merkel is due to meet Russian President Dmitry Medvedev on Aug 14. She could do worse than take Smith along with her. He drives a harder bargain than she does.