Germany, GM fail to agree on buyer for Opel

ERJ staff report (AN)

Berlin / Frankfurt, Germany (Reuters) -- Officials from the German government and General Motors Co. failed to agree today on a buyer for GM's Opel unit.

Magna International Inc. is still Germany's preferred partner for Opel, Chancellor Angela Merkel said, setting the stage for a showdown with GM over the takeover bids.

GM has received offers for a majority stake in Opel from a consortium of Canadian supplier Magna and Russia's Sberbank, from private equity firm RHJ International and from China's Beijing Automotive Industry Corp (BAIC).

GM has to agree on a choice with Germany, which is providing loan guarantees to the buyer, and the subject is likely to be an issue in the campaign for Germany's election on Sept. 27.

"We have made clear that we view the Magna plan as sustainable in all respects," Merkel said at a company visit in northern Germany, adding the talks between GM and German officials would need to go longer.

German officials informed GM representatives of their preference for Magna, said Jochen Homann, head of the German government's Opel Task Force after the four-hour Berlin meeting.

"GM was very guarded about this," he said, adding all the bids had several questions to be cleared up. Sources close to the talks said the officials had had a frank exchange of views.

GM licence fees

GM likes the offer from RHJ, a Belgium-based financial investor that aims to shrink production to return Opel to profit and may be open to selling it back to GM at a later date.

Hohmann said further talks would take place once issues had been cleared up. He said all potential investors were offering a modest sum in terms of their own capital and that GM had to give way on some issues, such as on license fees.

"We are pushing to get answers to the outstanding questions very quickly," he said.

Eventually, the two sides -- along with other European governments with Opel plants -- have to agree on a partner.

Both are represented on the Opel Trust, which has been responsible for Opel since GM entered bankruptcy in June.

The trust holds 65 percent of Opel shares and must approve the investor. GM holds 35 percent of Opel shares, while the German government is being asked to provide loan guarantees worth up to 4.5 billion euros ($6.4 billion).

Magna wants to expand Opel's full-scale car assembly business and forecasts high growth rates, particularly in Russia, home of consortium partner Sberbank.

Several people familiar with the matter said the states that are home to Opel factories also still prefer Magna's offer. The states of Rhineland-Palatinate, Hesse, North Rhine-Westphalia and Thuringia discussed the matter on Wednesday.

The state premiers, like Merkel are fearful of the prospect of mass layoffs among Opel's roughly 25,000 workers in Germany before September's election.

RHJ envisages shrinking Opel's production footprint and returning the company to profitability. RHJ announced earlier creditors gave the final green light to a debt-for-equity swap agreed by a majority of lenders late in May for its casted metal component maker Honsel, RHJ's only European automotive holding.

Homann said BAIC was still in the race for Opel but lagging behind.

Magna representatives met the heads of the European Opel dealers' association to discuss their involvement in the sales and distribution structure.

"We were very impressed; Magna explained their idea to us openly and honestly. They managed to win us over as ambassadors for Magna," said Albert Still, vice chairman of the Euroda dealership association.

In Britain, Business Secretary Peter Mandelson met management and unions at Opel sister brand Vauxhall. British authorities want to protect UK production and its 5,500 strong workforce. GM is to hold talks with the UK later this week.

From Automotive News (A Crain publication)