Commentaries
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Germany should call GM’s bluff
Recently bankrupted companies seeking billions in taxpayer handouts do not generally have the strongest hand at the negotiating table. Yet General Motors seems determined to drive a hard bargain over the bailout of Opel, its European car arm.
After months of tortured negotiations with the German authorities, GM is now threatening to reverse away from the deal. However, it appears to have few alternatives.
Opel reckons it needs 3.3 billion euros in loan guarantees and other support to see it through to the end of 2011. Germany is ready to stump up the cash, but would like to see Opel sold to Magna, Â the Canadian car parts maker, and its Russian backers.
GM is worried that Magna’s bid is too complex and would hand its precious intellectual property to the Russians. It favours a rival bid by RHJ International, the Belgian investment group, which requires less state support but would cost more jobs. With an election looming, however, the RHJ deal looks a non-starter in Berlin.
Driving an Opel round in circles
True to form, GM’s negotiator on the sale of Opel has poured cold water on expectations of a slam-dunk deal for Canadian car parts group Magna and its Russian backers.
John Smith (no relation, but I’m impressed by his negotiating) maintains in his blog that GM will compare the latest Magna offer with the proposal it has on the table from Belgium-based financial investor RHJ International.
Driving a hard bargain on GM’s Opel
John Smith, General Motors’Â chief negotiator on the sale of Opel, deserves a medal. But he certainly won’t be getting one from German Chancellor Angela Merkel.
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.
Schaeffler/Conti feud puts Schroeder back on stage
Gerhard Schroeder is back at centre-stage, seven weeks before Germany’s general election. A corporate feud between industrial holding group Schaeffler and car parts maker Continental AG has given the former chancellor the chance for a comeback as the workers’ champion, although he no longer holds public office.
When Schaeffler, the biggest family-owned industrial company in Germany, bought control of Conti last August, the two sides appointed Schroeder as guarantor of the interests of Continental and its workforce, shareholders and other stakeholders under an investors’ agreement.
GM negotiator slams Opel bidder’s Russian connection
The GM blogger is at it again. John Smith, General Motors’ group vice-president and chief negotiator for the sale of its stake in Opel/Vauxhall, lays into the bid by Canadian-Austrian car parts maker Magna –Â especially the Russian Connection –Â in his latest update on the state of the talks.
He also pours cold water on happy talk from German politicians of an early decision in favour of Magna, backed by the German authorities, rather than rival Belgium-based financial investor RHJ International, which clearly still has GM’s preference.
GM blog lifts hood on power struggle over Opel
It’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.
Magna sweetens Opel bid, but not on GM concerns
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.Â
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.
Politics, economics collide over Opel
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.
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