Magna: One day it’s RHJ International. The next it’s Beijing Automotive. But then don’t forget that Fiat is still interested. Leaks continue to stream out about possible contenders to buy Opel, General Motor’s European division. Will the carmaker go to a Belgian private equity group? Or to a Chinese or Italian rival?
You might forget that only a month ago, GM agreed to sell a majority stake in Opel to Magna, the Canadian car-parts maker. But the deal hasn’t been completed, and the US group now wants to extract more concessions from the bidder.
A little tactical jostling is fair game, but the German government is the real kingmaker in this drama. Berlin is to guarantee more than E3 billion of loans to Opel, and agreed to extend the company a E1.5 billion bridge loan when the deal between GM and Magna was struck. Even with these commitments, GM cannot simply do as it pleases. What the German government gives, it can also take away.
In Berlin, Magna looked like a better buyer than Fiat. It didn’t propose to cut as many jobs at Opel’s German operations, which account for half its payroll. GM also preferred the Magna proposal because, unlike Fiat, the Canadian company offered some cash for the stake.
BUT the German government isn’t just focused on jobs, and is also interested in Opel’s long-term future. It remains to be seen whether German politicians will view RHJ, which was a strong contender from the outset, or Beijing Automotive as serious long-term custodians.
Also, attempts by GM to put constraints on Opel certainly don’t play well in Berlin. GM reportedly wants to keep Opel out of the US market, although it will be hard to keep it out of Canada, Magna’s home base. GM is also rumoured to be wary that Magna’s Russian connections – Sberbank, the country’s largest bank, would be bankrolling the acquisition – could hamper its own growth prospects in Russia.
The German government isn’t likely to fund an Opel bailout that would leave the company severely restricted in both the world’s largest market and in one of the fastest-growing ones. GM is right to defend its interests. Berlin would be wrong to forget Opel’s.
