Opel Watch: GM OKs Magna. Government to Decide Tonight
The marathon meeting at the Adlon may not have been for naught after all. “After hours of talks with Canadian auto parts supplier Magna International, GM has reached an agreement, in principle, ” Reuters reports. Now they have to agree on a memorandum of understanding that will serve as the basis for bridge financing of €1.5 billion ($2.1 billion) and the trustee plan that comes with it. The German government will not give the bridge financing without the trustee scheme. Otherwise, their money and Opel will be drawn into the black hole of the Chapter 11 filing that is expected for Monday.
A framework agreement has been reached, says Reuters, but the MOU has not been signed as the story hits the wire. The people with the $2.1 billion (graciously provided by the German taxpayers) will meet at 6 p.m. This being Germany, they want something in writing. Preferably with the seals of GM and Magna at the bottom. And finally, before 6p.m.: Habeas Letter Of Understanding! Signed by GM, Magna, and Russia’s Sperbank.
BBC confirms that “Canadian-Austrian car parts maker Magna International has reached an agreement in principle to rescue GM Europe, owner of Opel and Vauxhall. The agreement was reached with General Motors, but will need to be approved by the German government, which will provide funding to the new owner.”
The Belgium government, home of an Opel plant in Antwerp, already complained. Their Minister for the Enterprise and Simplification, Vincent Van Quickenborne said Germany didn’t stick to the agreed-upon rules, and he is “very worried about the whole situation.”
“Not so fast,” said Herr von und zu Guttenberg. According to Der Spiegel, any deal must first pass the scrutiny of the German government. “We cannot say that there will be a decision today,” said the blueblooded economy minister. Well, then maybe tomorrow, early in the morning. After the EU has been properly informed and cooperated with.
Vice chancellor Steinmeier wants to get it done tonight: “Today is the day when we should try everything to build the basis for the future of Opel.” He already called Magna’s Stronach, who’s back in Graz, Austria, and congratulated him.
Remember: While Magna is getting the limelight and will have a strong hand in running the show, they are far from owning the place. According to the previous plans (which may or may not have survived the marathon negotiations—we shall see) Russia’s Sberbank will own 35 percent of Opel, Magna 20 percent, and Opel employees will get 10 percent. GM won’t go away, they’ll retain 35 percent of the business.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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I don't exactly understand how this works. Magna is listed as the buyer but they get 20%. The German Government gets 10%. The Russians are buying 35% and GM keeps 35%. The way I see it, that makes it a joint partnership between GM and a Russian Bank with some other major shareholders. Why does Magna get so much credit?
@IGB Magna are the friendly face of Austrian business working as a front for the Russians to take control of a big slice of German Industry. Of course, most Germans are seduced about the possibility of their little Austrian cousins providing some money to keep brave and proud German workers in their jobs. I am still utterly amazed that no one in Germany is making a fuss about Kremlin supported businessman getting their hands on Opel technology and control over their plants. For sure GM doesn't give a stuff about the Germans. They just want to be sure that they can exploit as much know how from Opel (already done!) and get access to revenue from the Russian emerging market. GM are already trying to compete with Opel by selling the Chevvy Cruze (built on the same platform as the next generation C-segment Astra) at €1,500 less than the current base model Astra. The "Magna" business case makes no sense at all. No job cuts, no cost savings. On the revenue generation side, all they can say is that they will go for 20% market share in Russia. Will that be with superior product (and if so, why only increase sales in Russia - superior product sales further afield?!). Or will that share come because the Russian government (now by proxy a player in the auto business) start to change the legislative rules to be in favour of Opel? Either way, a doubling of market share for Opel in Russia will only mean increased volumes of around 150K units per year. That's just not enough revenue to turn around the problems that Opel has been going through. Meanwhile, my intelligent and informed German friends seem to know nothing about Sberbank or the Russian link. They still think those nice friendly Austrians are going to be in charge and that they will be able to take control back from them in no time at all. It's a shocker!