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Two Remaining Suitors Continue Talks On Opel-Vauxhall

Unions Seek To Stop GM Buy-Back Option.

Beijing Automotive Industry Group dropped out of the race to acquire Opel-Vauxhall, leaving the Magna-Russian consortium and RHJ, a Belgian listed company that used to be known as Ripplewood Holdings Japan, to fight over the spoils.

RHJ is linked to the U.S. private equity firm Ripplewood Holdings. It has said it wants to take a 51 per cent stake in the former GM Europe minus Saab, with GM of the U.S. retaining most of the rest. This has led to labour suspicions that the RHJ bid would lead to a brutal slimming down of Opel-Vauxhall, which would then be sold back to GM when the U.S. company’s finances had improved.

The Magna deal would give the Canadian company 27.5 per cent, the same as Russian bank Sberbank. GM would have 35 per cent and staff 10 per cent.

Beijing Auto said it withdrew because it failed to agree on intellectual property issues.

As the talks dragged on, Opel’s union showed it was beginning to lose patience, and threatened to boycott the negotiations unless they received more influence during the talks. The unions have urged the German government to stop GM being offered a buyback clause or right of first refusal of any future sale.

Germany is prepared to lend €4.5 billion to save perennial loss-maker Opel-Vauxhall. It has already provided a short term loan of €1.5 billion. Last year Opel-Vauxhall (and Saab, the old GM Europe) lost $1.6 billion, and is expected to lose another $3 billion in 2009. It hasn’t made serious profits for 10 years.

According to IHS Global Insight analyst Tim Urquhart, either Magna or RHJ will have their work cut out to make a go of Opel-Vauxhall.

“Whoever wins control of Opel will face an uphill task to make it into a viable concern,” Urquhart said.

Neil Winton – July 29, 2009

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