By on October 30, 2009

Spanish Opel workers strike (courtesy:globeandmail)

GM’s sale of Opel to Magna/Sberbank is being held up by the European Union, which is looking into whether the German government unfairly favored Magna’s bid. But while the interregnum plays out (the EU will decide by November 27th), GM has plenty of time to develop a case of seller’s remorse. After all, GM’s VP for Global Engineering Mark Reuss recently told Autoline After Hours that Opel is completely integrated into GM’s global product development, and that the relationship “won’t change.” Does that, as Business Week’s David Welch asked, mean GM will keep all of Opel’s development capacity while reducing loss exposure to 35 percent? Reuss had to change the subject, but it’s obviously not the case. With Daewoo under fire, GM would clearly prefer to keep Opel’s development capacity integrated, and keep its intellectual property out of the hands of Russian automakers. And with German newspapers reporting that GM’s board is considering a “plan B” to keep Opel within the GM fold, Opel’s workers are threatening to strike.

Ultimately though, it seems that the Magna deal will ultimately go through. The EU is not likely to block the deal for the simple reason that they won’t take over the German government’s interim financing or Magna deal-dependent $6.7b loan. Without this money, Opel would enter bankruptcy, leading to deep cuts in employment across Europe. Meanwhile, Magna has concluded a deal with Opel’s Spanish workers, continuing Magna’s back-away from the deep employment cuts that might have scuppered the deal.

Meanwhile, GM Europe’s Carl-Peter Forster tells Reuters that opposition to the Magna deal on GM’s board is “clearly below 50 percent.” And if you look at the collected arguments for keeping Opel, they are based in regret over giving up development capacity more than anything resembling a strong financial argument for keeping the troubled European division. But when all of the compromising is over, will there a strong financial argument for a Magna-owned Opel? IHS Global Insight’s Tim Urqhart thinks not:

We need to see some serious structural changes at Opel-Vauxhall. Every time Magna talks to the representatives at a plant it comes back with a huge compromise on job losses. At the start of the year there was a general consensus that four out of the 10 plants should go. Now that’s down to probably none, although the Antwerp, Belgium, plant is still under pressure

If Magna can’t restructure Opel to profitability, and if it can’t monetize the Opel intellectual property that GM is fighting to keep out of the Russian industry’s hands, it will be stuck with a losing proposition. It’s looking like it will be a good month before we really understand what Opel IP GM will be able to keep exclusive, and whether Magna-Opel will be a viable proposition. And until a deal is reached, the possibility of an Opel bankruptcy can not be ignored.

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3 Comments on “Opel Workers: Can We Do This Deal Already?...”

  • avatar

    It’s looking like it will be a good month before we really understand . . . whether Magna-Opel will be a viable proposition.

    Not for me. I’ve known for months now. Magna-Opel won’t work.

  • avatar

    Jobs are going to be lost here. It will happen. Germany has been playing a bit a bully ignoring some other bids. I believe GM can still write a letter that would bust the Magna deal if they wanted to, but I don’t think the EU has to step in. Germany could get its loan money back immediately and send Opel in to bankruptcy, or it could continue to support Opel and help find another buyer.

    One of Germany’s problem was the loss of jobs that was going to occur under GM’s plans to restructure. That is likely going to happen no matter how this shakes out.

  • avatar

    Jobs in the auto industry have been primed for big losses for a long time. The overcapacity will go down somewhere and it looks like the european and US gov’ts are scrambling to keep it from happening on their turf while not freaking out the World Trade folks.

    I think the market forces will snuff GMNA and GMyurp no matter what they try, it’s to vulnerable and something will have to give.

    Too big (and dumb) to survive?


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