Opel Watch: Buyback Is a Bitch

A month ago, we reported that GM offered to buy back Opel some day “when we do better after a restructuring phase.” Offered? GM downright demands the right to buy back Opel after a buyer has successfully resuscitated and restructured Opel.

The rumors of such a demand have been around for a while. GM is pretty much the only one on the planet who thinks this is a swell idea.

A week ago, Belgium’s Standard headlined “GM dringt aan op terugkoopmogelijkheid voor Opel” — any child knows that this means “GM demands buy back option for Opel.” A few days later, Roland Koch, premier of Opel’s home state Hesse sent a “ clear response of opposition” to that plan. GM should listen to Herr Koch, because without his support, no deal.

Either GM didn’t get the memo, or they are hard of hearing. One can understand that they are having problems understanding Dutch or Deutsch (or Flemish). So today, Canada’s Globe & Mail puts it in plain English: “GM push for buyback could halt Magna’s Opel bid.” It’s not too hard to understand that the buyback demand is a deal breaker. The Globe & Mail spells it out:

Magna, which is leading a joint bid with Sberbank of Russia to take a controlling stake in Opel, does not want to perform the difficult and lengthy task of repairing the auto maker and restoring it to profitability, only to be forced to sell the division back to General Motors in a few years, people close to the negotiations said yesterday.

As evidenced by Herrn Koch’s reaction, the German government would also take a dim view of any clause allowing GM to buy back Opel. Germany goes by old Admiralty law and claims salvage rights, German style: We save the wreck, we keep it.

According to the usual source close to the matter, the buyback clause was added after the original memorandum of understanding was signed between Magna, GM and the German government in May. “If General Motors changes the game, then Magna will walk away,” the source said.

The buyback imbroglio may explain why GM resurrected other bidders, such as RHJ and China’s BAIC. BAIC probably will say “bu hao” (no good) to the request, and would (once alone) call the GM negotiators “250s” (the Chinese way of saying that someone is three cans short of a sixpack.) RHJ could possibly go for it—if the price is right. But they need the help of the German government, and their answer is: “Nein. Keine Rückkaufklausel.”

The Frankfurter Allgemeine doesn’t think that the buyback clause is a deal breaker. Why? It may not have occurred to GM that they don’t own Opel anymore. 65 percent of Opel are in trusteeship, precondition for the €1.5 billion bridge loan the German government gave. If GM continues to play games, the trustees just may make a decision.

Update: Reuters reports that suitor RHJ posted a sharply wider full-year loss and a 43 percent fall in the value of its portfolio, and most likely will not have the money to buy Opel.

“RHJ can’t acquire a majority stake or a large minority in Opel, because they simply don’t have the cash — RHJ doesn’t even come close,” KBC Securities analyst Tom Simonts told Reuters.