The European media is full of stories about suitors lining up to buy a piece of General Motors Europe’s Saab and Opel-Vauxhall subsidiaries, but nowhere can you find a compelling reason why investors would want to buy into these perennial loss makers.
The Financial Times, in an item headlined “GM’s European arms lures investors”, says upwards of 7 investors “including several sovereign wealth funds and at least one Asia-based private equity firm” want to buy a stake in GM Europe, which the U.S. parent has said it wants to float off.
Opel-Vauxhall is seeking €3.3 billion in loans and financial guarantees, mainly from Germany, to help it ride out the recession.
No word on why anyone would want to risk their hard-earned cash on a company which lost $2.88 billion last year, with a little bit of help from Saab of Sweden.
The Financial Times again, reports out of Sweden, that Saab has received interest from 20 what it calls “active parties”. No suggestion as to why a company which sold 93,000 vehicles last year, and needs annual sales of 130,000 to break even, would be attractive to investors. A Swedish court Monday gave Saab more time, until May 20, to restructure in bankruptcy.
German business daily newspaper Handelsblatt reported that a high-ranking German government minister planned to visit Abu Dhabi to talk about the possibility of the Gulf emirate taking a stake in Opel. This was later denied. Last month Daimler, which owns premium carmaker Mercedes Benz, sold a 9.1 per cent equity stake to Abu Dhabi’s Aabar Investments. Nobody questioned why Abu Dhabi would want a piece of Mercedes. That was obvious.
Reuters reports from London, quoting the Financial Times, that Commerzbank is preparing an offer document to a “handful” of potential investors in Opel.
Analyst Max Warburton of Bernstein Research in London has said say that if companies like Opel-Vauxhall and Saab fold this might ease the perpetual problem of poor returns by European autos. He called Opel one of the most deflationary forces on European pricing in the last decade.
So why would an investor want to buy into, and perpetuate that?
Professor Ferdinand Dudenhoeffer of the Center for Automotive Research at the University of Duisberg-Essen has said it would be possible to make Opel-Vauxhall profitable if it teamed up with a partner like Ford Europe or Peugeot of France to cut development costs by sharing the cost of developing engines, transmissions and components.
Perhaps the potential investors are looking past the current problems and see success in the future.
Neil Winton – April 15, 2009