Commentaries

Now raising intellectual capital

Can Magna keep its model juggling act with Opel?

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OPEL/Cries from Volkswagen about pulling its business from Magna if the Canadian car parts maker ended up owning a stake in GM’s former European unit Opel ring somewhat hollow given the success Magna has had in juggling its customers’ different needs so far.

Even so, Magna is trying hard to keep its customers — which also include Toyota, Ford and BMW — happy by vowing to ringfence Opel from the rest of its business now it has won the long battle to buy GM’s former European unit.

Sure, these carmakers will want watertight assurances over the supplier’s tie-up with one of their competitors. But they can’t have it all ways if they want to continue to outsource their parts — and even the construction of whole cars — to keep their costs down.

Given the tortuous journey to agreeing a buyer for Opel, Magna’s customers have had plenty of time to work out what guarantees they will want, although it is only now that a deal has been done that they will get to hear the full details of the arrangements between GM, Opel, Magna and its co-investor, Russia’s Sberbank. Magna will have to show them it can treat its own car manufacturer like any other client.

Magna sweetens Opel bid, but not on GM concerns

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Canadian-Austrian car parts maker Magna has sweetened its offer for General Motors’ main European arm, Opel, by pledging more of its own capital up-front as it tries to burn off Belgium-based financial investor RHJ International, which has GM’s favour so far. But the improved bid doesn’t appear to address the U.S. auto maker’s main concerns about future control. 

According to a German government source, Magna is now offering to inject 350 million euros immediately, with another 150 million to be raised through a convertible bond. Magna had originally offered just 100 million of its own capital up-front with 400 million to be raised in bonds. That compares with RHJ’s offer of an initial 175 million euros, plus another 100 million at the end of 2012.

Conti should turn tables on Schaeffler

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AUSTRIA/  

Porsche isn’t the only family-controlled German company that has got itself into a complete pickle bidding for a far larger rival.

    Indeed, if you want a test case of how ambition can land a company in serious financial difficulties, look no further than Schaeffler, a privately-owned ball bearings maker which has
seriously overextended itself following a bid for listed car parts maker Continental last year.

Politics, economics collide over Opel

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Political and economic logic are set to collide in the byzantine decision-making over the future of German carmaker Opel, the main European arm of fallen U.S. auto giant General Motors.
If politics prevail, as seems likely, the cost to German taxpayers will be higher and the chances of commercial success lower.

The aim of the Berlin government and four federal states, which are sustaining Opel with bridging finance, is to save as many German jobs and production sites as possible. That makes political sense ahead of September’s general election. But the business logic is that only a greatly slimmed-down Opel can survive in an industry with chronic overcapacity.
In theory, it is up to GM’s board to choose among the three offers it expected to receive on Monday from Canadian-Austrian car parts maker Magna <MGa.TO>, Belgian financial investor RHJ <RJHI.BR>, and, less plausibly, Chinese state-owned auto maker BAIC. But there are several other powerful players with a say. They include the trustees responsible for the company since GM entered U.S. bankruptcy in June, the German federal and state governments, Opel’s works council and, last but not least, the European Commission, which must approve the restructuring plan as a condition for authorising the state aid.

Opel keeps hope alive

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With General Motors in a Washington-guided bankruptcy and car makers around the world benefiting from government subsidies, politics has become firmly intertwined with the fate of the global auto industry. Even so, the deal reached in late May between General Motors and a group led by Magna International for GM’s European arm, Opel, smacked of trying too hard to come up with a politically convenient solution.

So the news that GM is now talking to other potential bidders is a welcome sign. Among the bidders are RHJ International, a publicly traded Belgian spinoff of the American private-equity firm Ripplewood Holdings, and Beijing Auto.

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