Opel Watch: GM, Germany and the Gordian Knot

GM is stepping up efforts to retain some control over Opel this week, as political pressure builds to find a solution before German elections on September 27. GM sources told the Wall Street Journal that Spain, Britain and Poland would jointly contribute “about €1B” towards repaying a German government bridge loan. Should the nationalized American automaker pay off the note, they could then sell Opel to their “preferred” third party buyer option, RHJ. The private equity fund dug around in the couch and came up with another €25M, raising its offer to buy Opel from GM to €300M. Coincidence?

RHJ backers may have been “inspired” by GM’s desperation to sweeten the pot, but it isn’t likely to make much of a difference. Magna’s bid is worth €500M (€350M in upfront equity). Job cut estimates—an important element for Germany’s strong labor unions—are about the same for both bids. Add the German government’s repeatedly-stated preference for Opel, and it’s obvious that RHJ’s extra ante is too little too late.

GM’s fund raising efforts with European governments who just happen to host Opel plants is of considerably greater consequence. German government sources tell Dow Jones that they consider GM’s extort—uh, negotiations—“legitimate.”

In fact, DJ reckons GM could end up with a majority stake in Opel. GM sources tell the Wall Street Journal that GM could put as much as $1B of “its own money” down to keep Opel all in the family. Just to clarify, that would be American tax dollars going to save Opel.

But not if Klaus Franz has anything to say about it.

“It’s not enough with just 1.5 billion or 2 billion euros,” Opel’s union boss tells Automotive News [sub]. “In order to pay back the bridge loan, GM needs to come up with $2 billion, and then there would not be a single cent left to invest in new products or restructuring the 25 to 30 percent of over capacity.” And one more thing. “The employees want to make sustainable contributions but not if we should return to 100 percent control under GM.”

But German Chancellor Angela Merkel has more than just feisty unionists to worry about. She’s also under fire from her own center-right party. “Should GM not want to sell Opel, then we will demand back our bridge financing of 1.5 billion euros,” CDU Parliamentary leader Volker Kauder said. “We can only remind GM’s leadership once again that they should stick to the agreement reached a few months ago and negotiate a contract with Magna.”

Meanwhile, even the EU is giving GM’s divide-and-conquer strategy a thumbs down. “We still have to see the details, but you cannot make state-aid conditional on localizing an investment in a particular country,” explain the European Commission’s competition arm via spokesman.

“The employees want to make sustainable contributions but not if we should return to 100 percent control under GM,” says Klaus Franz, head of Opel’s union.

Of course, Carl-Peter Forster, General Motors Europe president, is hedging his/your bets. Automotive News [sub] reports that Forster . . .

believes Magna International Inc. is most likely to win a bidding battle for Opel, but he says that the carmaker could also thrive under the ownership of its US parent.

“Magna is the most likely for me because all conditions have been met, the contracts have been negotiated and the financing is in place,” Forster told the Die Welt newspaper.

Expediency über alles, ja?