How long can General Motors hold off on choosing a partner for its European Opel/Vauxhall operations? The New GM, just born out of July’s bankruptcy, took a second round of bids from Canada’s Magna International, Belgium’s RHJ and China’s Beijing Automotive Industry Holding last week. GM rejected BAIC’s offer and has narrowed down the list to Magna and RJH, while further holding off on deciding between the two.
BAIC offered just 660 million euro in its initial bid, equal to about $940 million, for a 51 percent stake. The Chinese company asked the German government for 2.64 billion euro ($3.8 billion) in German government guarantees. Speculation had BAIC’s rival, Shanghai Automotive Industry Holding, waiting in the wings to come in at the last minute after BAIC’s weak bid. SAIC would have been a natural. It’s GM’s 50-50 partner assembling Buicks for the Chinese market.
German Chancellor Angela Merkel prefers Magna, for political reasons; the powerful labor union, IG Metall, likes Magna’s bid because it considers the RHJ bid a “short-term” investment. Here are Magna’s and RHJ’s bids, as reported by Dow Jones:
Magna, automaker GAZ and Russian government-controlled Sberbank would invest 500 million euro ($712.2 million) in return for 55 percent of Opel, with 100 million euro up front and the rest in loans, which would gradually become equity. Germany would support Magna with the equivalent of $6.4 billion in loan guarantees.
RHJ wants just 50.1 percent of Opel for the equivalent of $392 million, and seeks the equivalent of $5.4 billion in German government funding.
You can see why GM would favor RHJ’s bid. What’s worse, Magna wants to own Opel patents, and GAZ would obtain ownership of GM’s factories in Russia, where it has seen a lot of growth in recent years. The prospect that a state-owned Russian bank would be Opel’s primary investor can’t be very comforting to GM, either.
GM has been backed into a corner with Opel. It needs to maintain a substantial European presence to prevent becoming as provincial as Chrysler was before and after Daimler’s takeover. Right now, the Magna deal is its easiest way into German aid, which entails far more intervention than anything the Obama administration could devise. Working with a labor union that makes the United Auto Workers look like a pussycat (which it has been, anyway, lately) doesn’t help.
RHJ, on the other hand, looks like just the type of investor GM needs: one that gets into Opel quickly and briefly, keeps the European operation afloat while GM North America tries to get back on its feet and then takes its share of future profits, leaving the automotive operations to GM in a few short years.
Source : blogs.motortrend.com/6562665/editorial/gm-taking-its-sweet-time-with-opel-sale/index.html