General Motors will choose a preferred bidder for a controlling stake in its European Opel/Vauxhall business today. The deal has become a race between two suitors, Canada-based auto parts supplier Magna International (MGA) and Brussels-based industrial investment group RHJ International.
GM sits uncomfortably in the deal amidst the German government’s bias towards Magna. This is because Magna has vowed to make most of its job cuts outside Germany if it wins the deal. Both the suitors had indicated they would cut Opel’s workforce by a fifth – about 10,000 jobs – to make the unit financially viable.
GM is in a dilemma fearing that Magna, backed by Russia’s Sberbank, could capture Opel’s technology for the Russian car industry. Thus, if Magna wins the deal, GM may lose Russia’s increasingly important market for its models such as Chevrolet. Magna and Sberbank are planning to manufacture Opel cars in Russia with the biggest automaker in the nation, Gaz Group – jointly owned by the tycoon Oleg Deripaska and Avtovaz (partly owned by France ’s Renault). This has led GM to favor RHJ for the deal.
The German Government has revealed that funds are only available to Magna as the federal government and various German states have agreed to put up the entire €4.5 billion ($6.4 billion) in credit needed to finance the deal.
GM requires clearance from Opel/Vauxhall Trust Board, which holds a 65% stake and a German Government task force for the deal to go through. The five-member Trust Board set up in June includes two voting representatives of the German Federal and Regional Governments and two from GM.
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