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Stalemate as Opel sale stalls

Running out of puff: Talks between GM and Germany over the sale of Opel have failed to pick a new owner.

GM, Germany agree to disagree on preferred bidders for European operations

Opel logo23 Jul 2009

A SHOWDOWN is looming between General Motors and the German government over the sale of GM Europe after high-level talks in Berlin broke up today without a resolution.

The parties reportedly prefer different bidders for the European operations of Opel and Vauxhall, with the German government pushing for Canadian-based parts-maker Magna International, which is backed by Russia’s Sberbank, and GM preferring Belgian private equity firm RHJ International.

A third bidder, Chinese car-maker Beijing Automotive Industry Corp (BAIC), is said to be lagging behind the others, according to Automotive News.The problem for GM is that the German government and several German states that host Opel manufacturing plants have indicated they will only provide crucial billions of euros in state loan guarantees if Magna gets the nod.

The issue was discussed at a four-hour meeting in the German Chancellery in Berlin but, despite what sources called a “frank exchange of views”, several sticking points remain unresolved, including GM’s hold over licence fees.

There was no word on when the parties would return to the negotiating table, but GM has said it needs to close the deal by the end of the third quarter.

 center imageThe British government, which is concerned with the interests of Vauxhall’s manufacturing operations at Ellesmere Port and Luton, has also become involved, but has not yet shown a bidder preference.

The UK has been meeting separately with the bidders to seek assurances that Vauxhall’s 5500-person workforce would be considered in any re-shaping of the GM Europe operation. Like Germany, it has promised to partly underwrite the takeover of GM Europe, as long as the new owner meets government conditions.

Ellesmere Port has been nominated as one of the production sites for the new Astra from September.

UK business secretary Lord Mandelson won the support of UK car-manufacturing unions for the British stand after talks with Vauxhall on Wednesday.

Lord Mandelson said he had been in constant contact with the German and US governments over the issue.

Since GM filed for Chapter 11 bankruptcy last month, Opel has been run by the Opel Trust – a five-person board consisting of two GM representatives, two German government representatives and a fifth, non-voting “neutral” chairman, Fred Irwin – the president of the American Chamber of Commerce in Germany.

Any sale must be approved by the trust.

Under the latest offer from the Magna consortium, Magna and OAO Sberbank would both buy 27.5 per cent, with 35 per cent remaining with GM and the final 10 per cent going to Opel workers.

The proposal calls for €4.5 billion ($A7.8b) in government loan guarantees.

In a preliminary offer from last week, RHJ offered to invest €275 million ($A478m) for a 50.1 per cent stake in Opel, requesting €3.8 billion ($A6.6b) in government funding.

The RHJ plans for Opel reportedly include a scaling down of manufacturing operations to make it more profitable – a proposal that GM likes but the German government is wary of, fearing major plant closures and job losses.

BAIC's preliminary offer was valued at €660 million ($A1.14b) for a 51 per cent stake in Opel and it asked for €2.64 billion ($A4.6b) in German government guarantees.

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