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Opel 'sale' not a done deal
ADRIAN WYLD/THE CANADIAN PRESS
Magna International chairman Frank Stronach speaks to the media on Tuesday, June 2, 2009.
It feels like déjà vu.
Frank Stronach yesterday became history's first auto-parts maker to graduate to full-blown automaker status when General Motors Co. agreed to sell its 55 per cent stake in Adam Opel GmbH, its principal European business, to a consortium led by his Aurora.-based Magna International Inc.
Or that's how the story will be told.
But we've been here before, in late May, when Berlin, which bailed out and took control of Germany's second-largest automaker ahead of GM's bankruptcy, crowned Magna as its preferred bidder for Opel over Fiat SpA.
Stronach allowed himself a modest victory lap, touring Ottawa and other cities with a prototype of an all-electric car he planned to build. He could even see the day, he said, when Opels would be made in Canada.
Then came more than three months of gruelling negotiations as it became apparent that GM, emerging from bankruptcy protection more quickly and cocksure than anyone imagined, began finding reasons not to sell to Magna the crown jewel of its international operations.
A sale to Magna, partnered with Russian state bank OAO Sberbank and Russian oligarch Oleg Derapaska's troubled automaker OAO GAZ, was too complex, GM said, compared with a new bid GM had encouraged from a Belgian-based, but U.S.-run, private-equity shop, RHJ International SA.
A sale to Magna might find Opel's technology – GM's technology – used against GM in the Russian market, expected to eclipse Germany as Europe's biggest, post-recession. GM already makes Chevrolets in Russia at two Russian joint ventures.
Opel and its British Vauxhall arm are huge, by far the second-largest GM operation after its Chevrolet division, the guts of the "new GM" after the shedding of Pontiac, Saturn, Saab and Hummer.
More crucially, Opel alone in the remaining GM operations has the small-car expertise GM needs to make a comeback in the lucrative North American market. As it is, GM has relied for years on Opel's engineering for most of its Saturn line and new models like the Chevrolet Cruze.
So the reluctance of GM's announcement yesterday was palpable. There was none of the usual happy-talk fanfare of M&A unveilings. Merely a sole emissary dispatched from Detroit to tell Berlin that GM was giving up the fight to keep Germany's second-largest automaker.
Yet, as recently as two weeks ago, GM was flirting the notion of somehow raising the $6.1 billion (U.S.) to pay back the bailout funds provided Opel by the German government, and using the balance to refinance the loss-making Opel itself. Yesterday, GM oddly provided no details of the "sale" transaction. Instead, it repeated there are limitations on technology transfer – presumably to Russia, meaning GAZ – still remain to be negotiated three months after the May decision. In other words, there has been no progress on what has been the sticking point all along.
What GM said is that those negotiations will take another several weeks and a final deal will not be inked for several months.
All that will conveniently take the continued negotiations past the Sept. 27 German elections. Should GM back away from Magna again, political sensitivities will be greatly diminished. German Chancellor Angela Merkel has gone to unusual lengths to champion Magna and would have been politically embarrassed two weeks before the election if GM had acted differently.
But after Sept. 27, all bets are off. A continuation of GM's waiting game will coincide with the loosening up, finally, of global credit markets. GM might then succeed in raising the $6.1 billion needed to hang on to Opel.
That GM still yearns to keep Opel was strongly hinted at by Magna's own partner Sberbank. Its CEO, German Gref, cautioned Wednesday that "it is too early to say that a final decision has been taken. This is only a very important, intermediate stage of the deal."
By my count, there now have been about six of those. Stronach, 76, has visibly aged in this drawn-out ordeal that has required his personal diplomacy in Washington, Detroit, Berlin, the Kremlin and union halls across Germany. Stronach has walked away from futile causes before. I imagine that GM, which knows Frank well as his first customer back in 1957, is waiting him out.
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