General Motors picks Magna as buyer for European unit

General Motors picks Magna as buyer for European unit
AFP
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First Published: Thu, Sep 10 2009. 08 35 PM IST
Updated: Thu, Sep 10 2009. 08 35 PM IST
Berlin: A jubilant German Chancellor Angela Merkel said on Thursday that General Motors had agreed to sell its European unit Opel to her buyer of choice, two months after the US auto giant emerged from bankruptcy.
“I would like to inform you that the head of the chancellery was informed a short time ago by (GM chief Fritz) Henderson that GM’s board has decided to sell Opel to (Canadian auto parts maker) Magna under the terms we had negotiated,” she told reporters.
“I am exceptionally happy about this decision, which is along the lines of what the government wanted,” a visibly relieved Merkel, who is running for re-election this month, told reporters.
The US automaker said in a statement that Magna and its partner, state-owned Russian bank Sberbank, would purchase a 55% stake in what it called “New Opel,” with the Detroit giant retaining 35%. Employees would hold 10%.
Merkel took a healthy share of the credit for stitching up the deal to rescue Opel, which employs 50,000 people in Europe, half of them in Germany.
The agreement gives the chancellor, who is already leading in the polls ahead of the 27 September election, a powerful political boost.
“It has been demonstrated that the patience and determination of the government have paid off,” she said. “This was not easy. It is now possible for Opel and GM Europe to start afresh.”
She added, however, that this “new beginning will not be easy.”
Merkel had been pressing GM since May to sell the operations to Magna and the Kremlin-controlled Sberbank.
To up the pressure, Berlin went as far as to offer a €4.5-billion ($6.5-billion) financing package—sweeteners that were not available to a rival bidder, Brussels-based investment group RHJ International.
RHJ, which has major holdings in the automotive sector, was created in 2004 by the founder of US investment fund Ripplewood, Timothy Collins.
Both Magna and RHJ had said they wanted to cut 10,000 jobs at Opel, which includes Vauxhall in Britain, but the German government believed that fewer cuts would happen under the Canadian-Russian bid.
GM has owned Opel since 1929.
Thursday’s deal involves all of GM’s European operations except Swedish unit Saab, which is being sold to Swedish sports car maker Koenigsegg and Beijing Automotive Industry Holding Co Ltd (BAIC).
The US auto maker said there were still “several key issues” to be finalised over the coming weeks, but Merkel expressed confidence that the sale would go through.
The board of GM—majority owned by the US government since the company emerged from bankruptcy in July—was also thought to have been considering keeping hold of Opel.
The powerful head of Opel’s works council, Franz Klaus, had warned of a “cost-cutting orgy” if that came to pass, threatening protests if German factories were closed.
“The question has often been asked whether it was right for the government to choose an investor so soon. I believe that it was completely right,” Merkel said.
“I am confident, and I know that Opel still has a difficult road ahead of it, but I also know that the unbelievably well-motivated workers will now seize this with both hands.”
Analysts said Merkel would reap the benefits of sticking her neck out in favour of Magna.
Political scientist Nils Diederich from Berlin’s Free University told AFP, “It’s above all Mrs Merkel who will benefit from this success, because from a psychological point of view, the success of the government is always attributed to the head of government.”
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First Published: Thu, Sep 10 2009. 08 35 PM IST