GM worried about Magna deal for Opel, sign backup deal with RHJ, Beijing Automotive
When it came to buying Opel, Fiat's Sergio Marchionne told GM and the German government: "If you have a better offer, take it." They both took Magna, along with its Russian partners Sberbank and GAZ, because that consortium offered a better competitive arrangement and fewer job cuts in Germany. The deal wasn't slated to be finished until September, but it's encountered a few pockets of serious turbulence.
Magna's plans for engineering changes to Opels is worrying to GM because that alters the economics of the General's parts sharing. Magna also wants access to future GM technology, such as fuel cells, that GM doesn't want to hand over. GM is additionally worried about Sberbank, which has already stated its intention to sell its 35% stake once Opel is restructured; GM wants to have a hand in selecting the buyer, and it doesn't want its tech buoying the Russian car industry, nor does it want to compete with what could essentially be Russian versions of Opels.
Magna has its own problems as well, with at least one manufacturer telling the Canadian company that it could be a parts supplier or a competitor, not both. With all those fires to be doused, GM has entered into non-binding agreements with China's Beijing Automotive, and Belgium's RHJ International investment bank -- which looks like another Cerberus scenario -- as backup plans. As for the Germans, it was claimed today that no decision on Opel will come before the country's national elections on September 27.
The only problem with that is GM has stopped all payments to Opel, and the German firm is said to be losing €5 million a day. At that rate, the German government's €1.5 billion bridge loan to Magna that was part of the potential deal will run out before the elections. That means, as we've seen so many times before in this saga, something's got to break.
[Source: Bloomberg via TTAC]
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Reader Comments (Page 1 of 2)
Yaroukh 5:40PM (6/26/2009)
RHJ? Right Hand Ja... mmm... out of ideas
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adam1drift 5:52PM (6/26/2009)
GM already has access to the US treasury… why not keep Opel… did Opel perform that bad for GM? Its not like Americans will care if the US is bailing out the German auto industry…
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william tell 6:09PM (6/26/2009)
I agree, that does make sense but I think the government loans were only released to fund GM's US operations. Someone correct me if I'm wrong, but it was my understanding GM couldn't give bailout money to Opel by order of the Feds.
adam1drift 6:22PM (6/26/2009)
like they are paying attention where the money is going....
len simpson 6:45PM (6/26/2009)
I,ll buy that!
AUTOMANIAC 6:40PM (6/26/2009)
opel right now is loosing 5 milion euros every day.
Mr.Oak 6:43PM (6/26/2009)
Adam, this administration actually is. Just ask the banks, see how desperate they are to pay the government back?
They all now realize that unlike GWB, who just tossed money out the treasury's windows. BO & Company are looking over their shoulders. They no likey, tough $hit.
Tagg 7:56PM (6/26/2009)
The government knows where the money is going. It's going to AIG and Citibank bonuses and higher base pay!
len simpson 6:38PM (6/26/2009)
something's got to break? It,s already broke so now something's got to Give. Call AIG , they can fx it
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Flea 7:32PM (6/26/2009)
so, you wanted MONEY NOW from Magna and the russians instead of competitive technology from Fiat which would have provided a slower, but eventually more profitable recovery? All to avoid laying off 2000 workers, while the chinese will do a lot worse than that once THEY buy opel?
Someone wants this brand to suffer.
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Swede 7:33PM (6/26/2009)
Thats one badass cutout
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Tagg 7:55PM (6/26/2009)
I would be willing to bet that the "manufacturer telling the Canadian company that it could be a parts supplier or a competitor, not both." is Fiat/Chrysler. Magna is a huge supplier to Chrysler and who was the company looking to buy Opel before Magna? Fiat.
If it's not Fiat/Chrysler my next guess would have to be Ford. As reported earlier Ford is looking to trim it's supplier base and what better reason to boot Magna than by classifying them as a competitor?
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Jonathon Ramsey 7:57PM (6/26/2009)
It was actually VW.
http://www.autoblog.com/2009/06/04/report-vw-takes-issue-with-magna-opel-tie-up/
Judy Zik 12:34AM (6/27/2009)
Neither Ford nor Chrysler made sense since they are heavily dependent on Magna. I could see them being a bit cool towards future dependency but even that is questionable. Magna just brings so much R&D to the table. It is hard to say no to a company that can give you Stow N' Go or drive up to your offices with a fully operational and production ready EV vehicle. Magna will have to walk a tight rope though balancing their relations with other automakers. It will help that their Opel line wont be competing in the US market.
Richard 1:21AM (6/27/2009)
It wasn't one manufacturer, but several, including (at the very least) Peugeot-Citroen and VW. In fact, Marchionne, at least on the Chrysler side of things, made statements to the effect that the contracts for Magna parts would remain intact:
http://www.autoevolution.com/news/volkswagen-upset-with-magna-opel-deal-7461.html
Ford and VW have also made complaints to the EU about the use of government aid to distort competition, while the EU itself wants to review the whole deal since it seems to be favoring a Russian oligarch+Canadian autoparts group over a European carmaker.
Since the Magna proposal looks very much like a joke, I suspect the hidden GM agenda is to just make Opel go under.
Tagg 2:14PM (6/27/2009)
Gotcha JR, haven't been on in a few days.
Judy Zik,
Ford would make a lot of sense as does Fiat/Chrysler, in fact any automaker who buys anything from Magna makes sense. No Opel doesn't compete in the U.S. but Ford competes in Europe and I believe Fiat sells a few cars in Europe as well. Ford can design it's own products and sell commission either Visteon or their wn comapny Automotive Components LLC. to build them. Neither company needs Magna because there are plenty of suppliers out there, both big and small that could take their place. Toyota and Honda get by just fine without Magna.
It would be like Coca-Cola buying Mountian Dew from Pepsi to sell in it's machines. There no way that would happen. Besides, anything really thats really a break through technology would find it's way into a Opel first so they may as well do business with a pure supplier. One that won't play favorites.
adrian 8:12PM (6/26/2009)
Opel makes some of GM's best engineered cars but you have to draw a line in the sand when you are losing a hench amount of money every week, Regardless of how long Opel has been a part of GM.
GM should go back and get the rights to all Opel designs and technologies both past and present, Take Opel's key engineering staff with them and just let the rest sink.
Layoffs are not nice but it happens when bussines is bad. The German goverment may have to accept this just like any other goverment around the world. It's Life.
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patrick 9:33PM (6/26/2009)
Fiat should have been allowed to buy Opel. I saw nothing but trouble coming from the Magna consortium. I also don't think they'll keep those factories open either. Let's hope a new deal is struck.
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St?ane Dumas 10:08AM (6/27/2009)
I agree with you Patrick, GM should had sold (totally or partially) Opel to Fiat. Chrysler could have inherited the use of some GM platforms.
Beastage 12:19PM (6/27/2009)
I agree, if it was just Magna, ok... but that russian bank is funding major portion of the deal and I don't trust them.... and I know a thing or two about russians way of doing business.