GM to Keep Opel
11-03-09, 07:16 PM
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GM to Keep Opel
GM to Keep Opel in Second Break From Post-Bankruptcy Strategy
By Hellmuth Tromm, Katie Merx and Jeff Green
Nov. 4 (Bloomberg) -- General Motors Co.’s board voted to keep its Opel unit rather than sell a majority stake to Magna International Inc. and partner OAO Sberbank, citing an improving economy and the brand’s strategic importance.
The decision sets aside an agreement to sell 55 percent of Ruesselsheim, Germany-based Adam Opel GmbH to Magna, Canada’s largest car-parts maker, and Sberbank, Russia’s biggest lender. GM expects about 3 billion euros ($4.42 billion) in expenses to restructure the money-losing unit and its U.K. twin Vauxhall.
Retaining ownership of Opel marks the second shift in GM’s post-bankruptcy plan for unloading unprofitable divisions. Detroit-based GM said Sept. 30 it would wind down the Saturn brand after a sales agreement with retailer Penske Automotive Group Inc. fell through.
GM’s continued control of Opel is a “gain in terms of lowering risk on technology and platforms,” said Michael Robinet, an analyst for consultant CSM Worldwide in Northville, Michigan. “But they lose in terms of exposure to a European market that next year could be somewhat weaker.”
German Chancellor Angela Merkel had lobbied for the sale to Aurora, Ontario-based Magna since May, aiming to preserve jobs. GM notified Magna, Merkel and other European government officials before yesterday’s announcement, said a person familiar with the discussions.
Merkel in Washington
Merkel was in Washington to give a speech to Congress and meet President Barack Obama at the White House, and her plane left for Berlin around the time of GM’s announcement.
The German government, in an e-mailed statement, called on GM to repay 1.5 billion euros that had been provided for Opel. The request is according to the conditions of the loan, the government said.
GM had cited concern that selling Opel would give competitors access to vehicle designs that the Detroit-based automaker still planned to use after unloading a majority stake.
“We will continue to support Opel and GM in the challenges ahead and wish to thank everyone who supported the Opel restructuring process,” Siegfried Wolf, Magna’s co-chief executive officer, said in an e-mailed statement.
Fred Irwin, chairman of the trust created by the German government in June to supervise Opel, said in a statement that he hoped GM’s decision would lead to new business “stability” at the unit.
“GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable consideration,” CEO Fritz Henderson said in a statement. That plan will include working with European labor unions “to develop a plan for meaningful contributions to Opel’s restructuring.”
Government Aid
The U.S. carmaker, which emerged from bankruptcy in July, wouldn’t have received any money from selling Opel.
GM directors accepted the Magna proposal in September even after executives called a competing bid from Brussels-based investment firm RHJ International SA “simpler.”
RHJ said in October it was no longer interested in purchasing Opel. RHJ said on Oct. 15 it agreed to buy U.K. private bank Kleinwort Benson from Commerzbank AG for 225 million pounds ($362 million).
Merkel’s government would have backed Magna’s investment with 4.5 billion euros in loans, including 1.5 billion euros already provided to keep Opel solvent when its U.S. parent sought protection from creditors June 1.
When GM said it had chosen Magna on Sept. 10, Merkel said her “patience and persistence” had paid off. German voters handed her a second term on Sept. 27.
‘Opel Trap’
“Now Merkel has fallen into the Opel trap that some experts warned her about,” the Handelsblatt newspaper said yesterday in an editorial on its Web site. “The Americans’ interests won out and the German government is getting the run-around.”
Opel, identified by its lightning-bolt trademark, has about 50,000 employees across Europe. Germany is home to four Opel plants and half of the carmaker’s workforce, while 5,000 people work in the U.K. for Vauxhall.
Magna and Moscow-based Sberbank had agreed to invest a combined 500 million euros in Opel. The buyers planned to expand Opel into Russia with the help of GAZ Group, a vehicle manufacturer controlled by entrepreneur Oleg Deripaska.
GM wants to work directly with GAZ to develop the Russian auto market “on a mutually attractive basis,” GM said in yesterday’s statement.
Slimming GM
Disposal of Opel had been part of GM’s plan to trim brands and return to profit after its U.S. government bailout.
GM plans to sell its Saab unit in Sweden to a group including sports-car maker Koenigsegg Automotive AB and its Hummer sport-utility vehicle brand in the U.S. to Chengdu, China-based Sichuan Tengzhong Heavy Industrial Machinery Co. GM is also shutting the Pontiac division, as well as Saturn.
The U.S. government is GM’s largest shareholder with a 61 percent stake. “The administration was not involved with this decision, which was made by GM’s board of directors,” said a Treasury spokeswoman, Meg Reilly.
The European Commission had expressed concerns that Germany improperly made Magna the only Opel suitor eligible for aid. The commission had aimed to publish an antitrust decision on the sale to Magna by Nov. 27.
Germany, which has been in talks with other countries with Opel factories on spreading the financial burden, told GM in an Oct. 17 letter that its aid wasn’t confined to Magna and remained available to any investor chosen on the basis of economic criteria.
GM Is ‘Overreaching’
Opel, Germany’s second-largest carmaker after Volkswagen AG, may have cut as many as 10,900 jobs in Europe under the Magna deal, according to German government estimates.
It is unclear how many positions will be eliminated from Opel as a wholly owned unit of the largest U.S. automaker.
“GM is overreaching itself,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research in at the University of Duisburg-Essen. “The Western European market is highly competitive. It is too much for them to succeed in the U.S. and here. They won’t make it. Sooner or later Opel will go into insolvency.”
To contact the reporter on this story: Hellmuth Tromm in Berlin at htromm@bloomberg.net; Katie Merx in Southfield, Michigan, at kmerx@bloomberg.net; Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net
http://www.bloomberg.com/apps/news?p...d=akzdP1dy3Rhs
By Hellmuth Tromm, Katie Merx and Jeff Green
Nov. 4 (Bloomberg) -- General Motors Co.’s board voted to keep its Opel unit rather than sell a majority stake to Magna International Inc. and partner OAO Sberbank, citing an improving economy and the brand’s strategic importance.
The decision sets aside an agreement to sell 55 percent of Ruesselsheim, Germany-based Adam Opel GmbH to Magna, Canada’s largest car-parts maker, and Sberbank, Russia’s biggest lender. GM expects about 3 billion euros ($4.42 billion) in expenses to restructure the money-losing unit and its U.K. twin Vauxhall.
Retaining ownership of Opel marks the second shift in GM’s post-bankruptcy plan for unloading unprofitable divisions. Detroit-based GM said Sept. 30 it would wind down the Saturn brand after a sales agreement with retailer Penske Automotive Group Inc. fell through.
GM’s continued control of Opel is a “gain in terms of lowering risk on technology and platforms,” said Michael Robinet, an analyst for consultant CSM Worldwide in Northville, Michigan. “But they lose in terms of exposure to a European market that next year could be somewhat weaker.”
German Chancellor Angela Merkel had lobbied for the sale to Aurora, Ontario-based Magna since May, aiming to preserve jobs. GM notified Magna, Merkel and other European government officials before yesterday’s announcement, said a person familiar with the discussions.
Merkel in Washington
Merkel was in Washington to give a speech to Congress and meet President Barack Obama at the White House, and her plane left for Berlin around the time of GM’s announcement.
The German government, in an e-mailed statement, called on GM to repay 1.5 billion euros that had been provided for Opel. The request is according to the conditions of the loan, the government said.
GM had cited concern that selling Opel would give competitors access to vehicle designs that the Detroit-based automaker still planned to use after unloading a majority stake.
“We will continue to support Opel and GM in the challenges ahead and wish to thank everyone who supported the Opel restructuring process,” Siegfried Wolf, Magna’s co-chief executive officer, said in an e-mailed statement.
Fred Irwin, chairman of the trust created by the German government in June to supervise Opel, said in a statement that he hoped GM’s decision would lead to new business “stability” at the unit.
“GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable consideration,” CEO Fritz Henderson said in a statement. That plan will include working with European labor unions “to develop a plan for meaningful contributions to Opel’s restructuring.”
Government Aid
The U.S. carmaker, which emerged from bankruptcy in July, wouldn’t have received any money from selling Opel.
GM directors accepted the Magna proposal in September even after executives called a competing bid from Brussels-based investment firm RHJ International SA “simpler.”
RHJ said in October it was no longer interested in purchasing Opel. RHJ said on Oct. 15 it agreed to buy U.K. private bank Kleinwort Benson from Commerzbank AG for 225 million pounds ($362 million).
Merkel’s government would have backed Magna’s investment with 4.5 billion euros in loans, including 1.5 billion euros already provided to keep Opel solvent when its U.S. parent sought protection from creditors June 1.
When GM said it had chosen Magna on Sept. 10, Merkel said her “patience and persistence” had paid off. German voters handed her a second term on Sept. 27.
‘Opel Trap’
“Now Merkel has fallen into the Opel trap that some experts warned her about,” the Handelsblatt newspaper said yesterday in an editorial on its Web site. “The Americans’ interests won out and the German government is getting the run-around.”
Opel, identified by its lightning-bolt trademark, has about 50,000 employees across Europe. Germany is home to four Opel plants and half of the carmaker’s workforce, while 5,000 people work in the U.K. for Vauxhall.
Magna and Moscow-based Sberbank had agreed to invest a combined 500 million euros in Opel. The buyers planned to expand Opel into Russia with the help of GAZ Group, a vehicle manufacturer controlled by entrepreneur Oleg Deripaska.
GM wants to work directly with GAZ to develop the Russian auto market “on a mutually attractive basis,” GM said in yesterday’s statement.
Slimming GM
Disposal of Opel had been part of GM’s plan to trim brands and return to profit after its U.S. government bailout.
GM plans to sell its Saab unit in Sweden to a group including sports-car maker Koenigsegg Automotive AB and its Hummer sport-utility vehicle brand in the U.S. to Chengdu, China-based Sichuan Tengzhong Heavy Industrial Machinery Co. GM is also shutting the Pontiac division, as well as Saturn.
The U.S. government is GM’s largest shareholder with a 61 percent stake. “The administration was not involved with this decision, which was made by GM’s board of directors,” said a Treasury spokeswoman, Meg Reilly.
The European Commission had expressed concerns that Germany improperly made Magna the only Opel suitor eligible for aid. The commission had aimed to publish an antitrust decision on the sale to Magna by Nov. 27.
Germany, which has been in talks with other countries with Opel factories on spreading the financial burden, told GM in an Oct. 17 letter that its aid wasn’t confined to Magna and remained available to any investor chosen on the basis of economic criteria.
GM Is ‘Overreaching’
Opel, Germany’s second-largest carmaker after Volkswagen AG, may have cut as many as 10,900 jobs in Europe under the Magna deal, according to German government estimates.
It is unclear how many positions will be eliminated from Opel as a wholly owned unit of the largest U.S. automaker.
“GM is overreaching itself,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research in at the University of Duisburg-Essen. “The Western European market is highly competitive. It is too much for them to succeed in the U.S. and here. They won’t make it. Sooner or later Opel will go into insolvency.”
To contact the reporter on this story: Hellmuth Tromm in Berlin at htromm@bloomberg.net; Katie Merx in Southfield, Michigan, at kmerx@bloomberg.net; Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net
http://www.bloomberg.com/apps/news?p...d=akzdP1dy3Rhs
11-03-09, 09:37 PM
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Lexus Champion
The German government, in an e-mailed statement, called on GM to repay 1.5 billion euros that had been provided for Opel. The request is according to the conditions of the loan, the government said.
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