Magna sweetens offer for GM’s Opel
FRANKFURT/BERLIN–Magna International and Fiat have improved their offers for General Motors unit Opel ahead of a crucial week in which the German government is expected to decide which bid it backs.
German Chancellor Angela Merkel will hold a meeting of top minister today to review bids from Aurora-based Magna, Fiat, as well as Belgium-listed industrial holding company RHJ International. No final decision is expected today.
Italian car maker Fiat improved its offer on Saturday after top German officials said on Friday that parts maker Magna submitted a better plan than rivals.
Magna has also improved its bid, a source close to the negotiations said in an interview yesterday.
The U.S. government has given GM until June 1 to restructure its operations and prove it can be viable without state aid or face probable bankruptcy.
The decision on who gets Opel will be taken by GM, but the German government will play a big role because it would likely supply billions of euros in financing guarantees.
German Economy Minister Karl-Theodor zu Guttenberg said on Saturday that Fiat had improved its offer and he sensed the other bidders would sweeten their offers as well.
German reports said Merkel opposed Magna’s bid because the initial proposal foresees a cut of 2,500 jobs, most of them at Opel’s site in Bochum.
A source close to the talks said Magna had addressed that issue. "There are indications that Magna has improved its offer," the source said.
It might be possible to build Opel’s planned electric car Ampera in Bochum. Foreign Minister and Vice Chancellor Frank-Walter Steinmeier and Guttenberg said on Friday a decision on a preferred bidder would come this week.
All offers so far failed to ensure that tax money, which the government was willing to contribute, would not be lost, German media reported over the weekend free instant credit reports.
The bid by Magna International Inc. for GM’s Opel division in Germany is part of a broader plan by Canada’s largest auto-parts maker to expand into the fast-growing and potentially lucrative Russian market, a source close to the company said after the bid was unveiled last week.
Magna was one of three companies to submit bids Wednesday to GM (to acquire or invest in Opel, along with Italy’s Fiat SpA and New York-based buyout firm Ripplewood Holdings LLC. Two German governors have praised Magna’s bid for Opel as the best choice of the three.
Magna’s plan would see the Toronto-area company and Sberbank Rossii, Russia’s biggest savings bank, invest a total of $1.1 billion in Opel, a portion of which would be guaranteed by the German government.
GM and Sberbank would each own 35 per cent of the company, Magna would take a 20 per cent share and Opel employees would own 10 per cent. Russian car maker Gaz would act as an industrial partner.
In Berlin, Magna co-chief executive Siegfried Wolf said the company would try to reduce the 20,000 job cuts proposed in GM’s original restructuring plan for Opel by half.
All the bids for Opel involve job cuts in Europe, ranging from 10,000 to 18,000.
Wolf also said Magna would focus on increasing Opel’s market share in Russia to 20 per cent, with a long-run goal of selling a million cars in the country.
The Opel bid is a major strategic move for Magna, which has been hurt by the troubles in the North American auto market.
BMO Capital Markets analyst Peter Sklar said investors will be "relieved by the relatively modest magnitude of this potential acquisition."
From the Star’s wire services
Filed under: economics by Forest