Tucked away on page 4 of the Moscow Times today there is a remarkable article which made me wonder whether I wasn’t hallucinating.
So German Chancellor Angela Merkel has got her way. After months of pressure from the German government, General Motors has finally caved in and agreed to sell a majority stake in Opel to Canadian car parts maker Magna and Russian backer Sberbank.
RHJ International is playing a canny hand in the political poker match that is the sale of GM’s Opel. The Belgian financial investment house is keeping itself in the game by steadily upping the stakes, increasing the pressure on Berlin to take its bid seriously.
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 – especially the Russian Connection – in his latest update on the state of the talks.
General Motors and the German government are playing out the Chicken Run scene from the 1950s James Dean classic film “Rebel Without a Cause”.
Neither has leapt from their car yet, but there are growing signals from Germany that GM has its hand on the door handle and is preparing to drop its preference for financial investor RHJ in favour of handing control of Opel to Canadian auto parts maker Magna.
GM has so far been in no hurry — although the U.S. car group has been doing its best to keep up appearances with a statement following this week’s board meeting saying it hoped to make a recommendation to the Opel Trust Board “shortly”. But German pressure has been rising as a Sept. 27 general election approaches.
Germany’s eagerness to seal a deal with Magna — which has teamed up with Russian bidding partner Sberbank and automaker GAZ — is palpable.
Berlin is ready to get its cheque book out to provide state aid for a deal with Magna. But has made clear this would be reconsidered if GM opted for Belgian-based RHJ, which Chancellor Angela Merkel’s government fears would cut more jobs. RHJ would be an unpopular choice in Germany, where a leading politician famously branded private equity buyers “locusts”.
Berlin wants a deal closed in September and has set up an Opel Task Force to oil the wheels. Yet Opel workers are concerned that GM has been playing for time so that a decision is delayed until after the election.
They fear that stalling until after polling day would make it easier for GM to put Opel through insolvency proceedings and shed some of its factories and staff at a lower cost.
For Merkel, a deal on Opel’s future now would deprive her Social Democratic junior partners and rivals, who back Magna, of a potentially damaging campaign issue (“Merkel dithers while Opel burns”). But while it may yield short-term benefits, Berlin’s rush to hand Opel to Magna could yet backfire.
GM’s chief negotiator John Smith has been vocal in his criticism of Magna’s bid, specifically citing concerns about the use of GM patents and Russian expansion plans.
Magna’s Kremlin-backed partners operate in an opaque business environment where foreign players can suddenly lose control of a joint venture or face tax or regulatory obstacles.
It may well be GM that blinks in the run-in with Berlin over Opel, but Merkel shouldn’t forget that whoever bails out first, the Chicken Run inevitably ends in a car wreck.
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.