OPEL DREW down the first €300 million of a €1.5 billion bridging loan from Berlin yesterday, part of a preliminary agreement of sale between General Motors and a consortium led by Canadian car parts company Magna, writes DEREK SCALLYin Berlin
The ink is barely dry on the memorandum of understanding between GM and Magna, and the tough negotiations have yet to come, but the Opel rescue deal has already been panned by German car analysts and the auto press.
The general consensus is that, while it may boost the popularity of German government politicians ahead of September’s general election among Opel’s 26,000 employees, it’s unclear whether the deal will guarantee Opel’s future as a carmaker.
The first stage of the deal signed at the weekend was the transferral of ownership of Opel after 80 years from GM to a state-controlled trust.
Germany then made €1.5 billion of credit available for the cash-starved company to pay creditors. Opel will remain in state control for the next six months until a 65 per cent controlling stake is sold to Magna and its Russian partners, car company GAZ and the state-controlled Sberbank.
The final deal was heavily criticised by lead negotiator and economics minister Karl-Theodor zu Guttenberg. He threatened to resign if the Magna deal went through, saying it exposed German taxpayers to unacceptable financial risks.
As well as the €1.5 billion loan that has begun to flow, Germany has agreed to another €4.5 billion in loans and guarantees in the coming months.
If, for whatever reason, the sale fails to go through, Berlin will be left holding Opel.
“The concept is not without risks for the state and the guarantees it has promised for Opel,” said Mr zu Guttenberg.
With the sale, Opel’s money problems are far from over. Analysts suggest Opel urgently needs a €10 billion capital injection to keep the company alive in the short-term, and another €15 billion to develop new product lines to secure its long-term future. So far, Magna has promised to invest just €500 million in Opel until 2014.
Magna co-chief executive officer Siegfried Wolf told Bloomberg yesterday Opel was on track to deliver the new Astra compact this year. Too small to survive alone, with 1.5 million cars sold worldwide last year, Mr Wolf said Opel’s survival lay in the “industrial logic” of an alliance with Magna.
With talks still ongoing, Magna has yet to reveal its full strategy. So far it is clear that Magna wants to keep Opel on its current track, while improving the utilisation of German Opel plants with contract work for other car companies.
Whether they will continue to view Magna as a supplier or now as a competitor remains to be seen. Whether GAZ is in a position to invest anything is unclear: huge debts mean its shares are de facto owned by the state-owned Sberbank.
With the deal, the Russian car company has got its hands on Opel patents and technology, handed over by GM as part of the last-minute negotiations.
“So many things still have to be discussed but the Germans have negotiated themselves into a much worse position,” said Prof Stefan Bratzel, auto analyst at the Bergisch Gladbach Technical College, who sees future investment at Opel as the biggest question mark over the deal. While GM will continue to hold a 35 per cent stake, the money for research and development will have to come from the new owners.
General Motors Fast facts
- Founded in Detroit 1908
- The world's largest automaker for 77 consecutive years from 1931 to 2007, its production having been surpassed by Toyota in 2008
- GM manufactures cars and trucks in 34 countries, and sells them in 140 countries The firm employs 244,500 people worldwide
- It sold 8.35 million vehicles in 2008 under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling - BM