Business NEWS
Threat to sale of GM unit in Europe Opel to Magna
By Germaine Lombardo for CEOWORLD Magazine Updated:October 19, 2009
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Germany does not expect concerns at the European Commission in Brussels to lead to any serious problems with the planned sale of Opel by parent General Motors (NYSE:GRM). “We do not expect this to lead to fundamental problems,” a spokesman for the German Economy Ministry.
The European Commission voiced concern Friday over Germany’s planned aid for a consortium led by Magna International Inc. (NYSE:MGA) to take a majority in carmaker Opel (CVE:OPL) and suggested that General Motors be allowed to “reconsider” the deal.
GM is expected to sell a majority of Opel to Canadian auto-parts maker Magna International and Russian lender Sberbank – a consortium heavily favored by Berlin — under a deal announced in September.
But, General Motors has an alternative plan up its sleeve if the EU blocks the planned sale of its European unit Opel/Vauxhall.
“While the automaker continues to prefer a sale to Magna, GM executives are prepared to move to its Plan B if that deal should fall through,” the Wall Street Journal Europe said, citing people familiar with the matter.
The backup plan calls for GM keeping control of Opel and implementing deeper restructuring actions than the proposed buyers, Canadian auto parts maker Magna International and Russian state-owned lender Sberbank, are planning, the report said.
If forced to act alone, GM would fund the restructuring, which includes far more drastic headcount reductions, by soliciting government support or putting Opel into insolvency, the paper added.
GM on September 10 announced a preliminary plan to sell a 55-percent stake in Opel, with GM retaining 35 percent and employees 10 percent, a deal backed by 4.5 billion euros (6.7-billion-dollars) in state aid promised by Germany.
But EU Competition Commissioner Neelie Kroes last week questioned German public aid to support the transaction, saying there were “significant indications” that it was contingent on Magna winning the bidding for Opel.
Making state aid contingent on one particular buyer gaining control of Opel would violate EU competition rules.
A final deal was meant to be inked last week but has been postponed.
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