GM board sends chief Opel negotiator back to Germany

Tuesday, August 25, 2009

GM board sends chief Opel negotiator back to Germany

Christine Tierney / The Detroit News

General Motors Co., prodded by its board, is exploring ways to break an impasse in the sale negotiations for its Adam Opel carmaker, including even keeping it.

GM’s management had been pushed by the German government to reluctantly accept a bid from Magna International Inc., but its board expressed reservations about the deal at a meeting Friday, according to a source familiar with the situation.

GM’s chief negotiator John Smith will travel to Berlin in the middle of the week to brief German officials on the automaker’s options for Opel.

The government of Chancellor Angela Merkel said last week that it would provide $6.4 billion in loans to R?sselsheim-based Opel — but only if the U.S. automaker selected the bid from a Magna-led consortium.

The government did not extend an offer of aid to a rival bid from Brussels-based RHJ International SA. GM has not stated a preference but Smith has described the RHJ bid as simpler and easier to implement than Magna’s complex offer.

RHJ’s proposal would keep Opel within GM’s sphere of operations and make it possible for the U.S. carmaker to buy it back someday. It also avoids the tug-of-war over intellectual property that arises in the Magna deal.

The Canadian supplier is seeking 27.5 percent of Opel, with Russia’s Sberbank taking an equal stake. GM would retain 35 percent, and Opel employees would get 10 percent.

Another option — putting Opel through bankruptcy — has been characterized as possible but unlikely.

GM’s effort to see if it can keep Opel was first reported by the Wall Street Journal.

But analysts wonder how GM would raise the $4.3 billion it would need, according to its viability plan, to keep the German carmaker in business.

"How to get that much money in this market seems pretty daunting," said Joseph Phillippi of AutoTrends Consulting Inc. in Short Hills, N.J.

"They might be able to do something with their Asia Pacific (partners) to raise that cash," he said. "Four billion is a lot of money for a company that’s barely out of bankruptcy."

But keeping Opel is only one option under study. GM has not given up on the two bids on the table. Smith, who heads a GM group overseeing the automaker’s alliances, is expected to press the government in Berlin about what aid might be forthcoming if it accepted RHJ’s proposal.

He also is expected to discuss what would happen if Opel were to fail, even after receiving German government aid.

Opel has 25,000 employees in Germany, representing about half of GM Europe’s work force. Opel’s fate has become a political issue ahead of German national elections taking place on Sept. 27.

The White House said it would not get involved in the discussions over Opel — though President Barack Obama has discussed the issue with Germany’s Chancellor Merkel.

"The president’s view is that decisions made about the day-to-day operations at General Motors should be made by the folks at General Motors," White House spokesman Bill Burton said Monday.

The Treasury Department has the power to block any GM transaction of $100 million or more as a condition of its $50 billion loan to the automaker.

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