Opel Watch: We've Got Headaches by the Number

The hangover following the late night rescue of Opel is causing bigger headaches by the day. Last week, the German magazine Focus wrote that half of the €1.5 billion bridge loan, guaranteed by the German government, could escape “abroad”—€600 million to Spain, €150 million to the UK. Today, Opel denied that report. According to Die Welt, a drive for charitable donations yielded €200 million from Spain. The governments of Belgium, Austria, Poland, and the UK also pledged hitherto unspecified amounts to keep their Opel factories open. Then, German media wrote that GM wouldn’t hand over the Opel patents gratis. Oh no, they would want €6.5 billion in license fees over the next 10 years, €200 million in preferred stock, and €300 million in cold, hard cash for the patents that had been supposedly “sold” by Opel to Delaware. That topic is currently open, but “sources” say it ain’t true. Then there’s the matter of €4 billion for the Opel pension fund. The German government was asked to come up with the money, the answer was: “Nein!” Will it ever end? Nein.

Nobody expected that Magna would be magnanimous and fork over a lot of cash. Everybody was looking for Sberbank rubles. Everybody expected €500 million, if not more. Now, Der Spiegel reports that both will pay in a maximum capital of €100 million. The rest, €400 million, will be paid as a securitized loan.

The state government of Hesse, home of Opel’s headquarters in Rüsselsheim, asked McKinsey for advice. Thumbs down from the consulting company: “The assumptions appear optimistic, the profit projections due to cost reductions are ambitious.” McKinsey-speak for: “What have they been smoking?”

If they ever get them, Sberbank wants to unload their Opel shares as quickly as possible. Reuters says that “Russia’s Sberbank could offload its stake in German auto maker Opel in the future to local car producers GAZ, IzhAvto, Sollers or TaGaz.”

Whoever gets it, Russia is keen to get it hands on the Opel know-how, paid courtesy of the German government. Russia’s First Deputy Prime Minister, Igor Shuvalov, let it all hang out when the topic came up. “Opel is famous for its plentiful know-how. The goal (of the deal) is, on the base of its know-how and the possibilities Russia has, to create new know-how and to use it as a base to take a leap into the future,” Shuvalov told Reuters. Shuvalov even has dreams of the Opel R&D center migrating to Russia, says Automobilwoche [sub]. What did McKinsey want to say?

Canada’s Globe and Mail sums it up nicely: “It’s entirely possible the Magna bid is in serious trouble. Indeed, the obstacles—political, economic, financial and industrial—are formidable and the negotiations are just starting . . . . Let’s just say that Magna’s bid for Opel is shaping up to be the most complicated auto deal of the year.”

Even simple deals have a high propensity for failure. A complicated deal like this is a recipe for disaster. China is ready, willing and able to pick up the pieces.