The decision by General Motors to admit it is still in serious talks with other bidders for its Opel unit is being seen by analysts as a way to exert pressure on preferred suitor Magna International to complete the deal by the mid-July deadline GM and Magna have set themselves.
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Magna, the Canadian-based part supplier, and its partner, Russian state-owned bank Sberbank, are still the most acceptable partners to GM and the German government, analysts told Reuters.
But to make sure Magna doesn’t apply too much pressure to get its own way, GM has said it is close to signing non-binding agreements with both China’s Beijing Automotive Industry and Brussels-based RHJ Holdings, the parent of New York City-based private equity firm Ripplewood Holdings. Fiat, one of the original three bidders, has also not yet been ruled out.
The main obstacles to a Magna/GM deal are the supplier’s access to GM’s technology and design capabilities and responsibility for Opel’s pension liability.
“Magna definitely wants to reach an agreement and [Russian prime minister Vladimir] Putin wants one too, so there’s a considerable commitment and a lot would have to happen to cause a collapse,” IHS Global Insight analyst Christoph Stuermer, who is convinced a deal will be reached, told Reuters.
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By GlobalDataWith the 15 July deadline fast approaching, sources close to the talks would not rule out the emergence of unexpected demands and threats of a delay, or an even an atmosphere of brinkmanship returning, but they maintained it was part of a show and insisted GM and Magna’s ultimate interests remained aligned.
“I think these talks with BAIC are more in the spirit of ‘if Magna fails’ – I don’t hear anyone, anywhere inside GM thinking they are not full steam ahead with Magna,” a GM source said.
Another source, familiar with Magna’s thinking, said: “The negotiations are proceeding well and last week there was massive progress. At the moment there are no genuine deal-breakers.”
Magna left GM at the altar the last time it teamed up for an acquisition with a Russian partner – GAZ in that case – when, the GM source said, it backed out abruptly from buying a stake in Opel diesel engine supplier VM Motori of Italy, and there was no guarantee it might not repeat such an act.
Magna extended an offer to lend Opel EUR350m (US$49m) to plug an immediate funding hole but, after its only rival at that point, Fiat, pulled out, it suddenly began arguing for greater assurances on repayment, leaving Berlin feeling cornered.
GM CEO Fritz Henderson has said talks were not exclusive and the German government has insisted repeatedly the race remained open to BAIC and Fiat. Even disqualified bidder RHJ International is being touted as an option again but time is not on anyone’s side in this game.
“Naturally all of this is only to exert pressure on Magna… They have to reach an agreement and in my opinion that will happen,” said Jaap Timmer, the head of Opel’s European dealer body Euroda.
The government would be hard pressed, however, to pretend it has not already fully committed itself after writing a EUR1.5bn (US$2.11bn) cheque to keep the carmaker afloat until an investor can be found.
One person, who recently met with top economics ministry official Jochen Homann for an hour-long discussion over Opel, said the ministry did not actually see BAIC’s offer as a viable alternative: “The feedback from Homann was that Magna is in the pole position.”
Even Opel’s senior labour leader, Klaus Franz, no longer betrays any signs of concern that talks could break down at this point and dash the hopes of his 50,000 European workers.
“I have memorised the four-page memorandum of understanding in English and German word for word and I see no major hurdles left for a deal,” the 57-year old veteran labour leader and Opel deputy chairman told Reuters.
