German chancellor seeks clarity on Opel from GM

FRANKFURT/DETROIT Fri Jun 10, 2011 3:33pm EDT

A sign indicates the way towards the headquarters of German car manufacturer Opel in Ruesselsheim, 20km from Frankfurt, June 10, 2011. REUTERS/Kai Pfaffenbach

A sign indicates the way towards the headquarters of German car manufacturer Opel in Ruesselsheim, 20km from Frankfurt, June 10, 2011.

Credit: Reuters/Kai Pfaffenbach

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FRANKFURT/DETROIT (Reuters) - German Chancellor Angela Merkel demanded clarity from General Motors Co about the future of Opel after reports this week that the U.S. carmaker was considering putting its European arm back up for sale.

"The chancellor has great empathy for the Opel employees who are put in a state of insecurity by rumors such as these," German government spokesman Steffen Seibert said on Friday.

German media reported on Thursday that possible buyers could include Chinese carmakers or Germany's Volkswagen, though Europe's biggest carmaker is already juggling with several other deals.

Seibert said Merkel was irritated that GM had not reacted to quell rumors of a possible sale. GM, which had declined to comment on the reports, has not been in touch with the chancellor's office or the economy ministry, he said.

GM dropped plans to spin off Opel in 2009 after months of negotiations to sell it, and embarked on a drastic restructuring to get the unit, which lost $1.6 billion last year, back on track.

In a fresh report on Friday, Welt Online cited company sources as saying China's Beijing Automotive Industry Holding Co (BAIC), among bidders last time, had approached GM's management.

Advisers close to BAIC told Reuters no formal offer had been made. BAIC President Wang Dazong, an engineer who spent 20 years working at GM, has said the company is aiming to expand outside its Chinese home market.

GM, which has a Chinese joint venture with China's SAIC Motor Corp, declined to comment on Seibert's statements and on the report that BAIC may be interested.

Opel also declined to comment.

Sources have told Reuters there is no formal sales process at this point for Opel.

CALMING NERVES

People familiar with the matter told Reuters on Thursday that GM Chief Executive Daniel Akerson was frustrated with Opel's inability to return to profitability, and was reviewing options for the European unit.

Akerson was one of only two GM board directors who voted against keeping Opel in late 2009, believing Europe was a market of national champion automakers -- VW in Germany, Fiat in Italy and Renault in France -- and pan-European luxury brands such as BMW and Daimler's Mercedes, a person familiar with Akerson's thinking said.

Opel is neither, and Akerson believed it would be a long battle to fix it.

Opel is expected to break even this year and show a profit in 2012. But its management has said it will likely take about five years to restore the brand's image in its home market after the carmaker appeared close to the brink for months.

Jefferies analyst Peter Nesvold said GM's management had indicated in a conference earlier on Friday that Europe was key to developing global car platforms.

"This suggests to us that an outright sale would be difficult, but rather perhaps a partnership makes more sense."

Skeptics of a sale said GM would create a global rival by selling rights to its technology and platforms to a Chinese company that could then export Opel vehicles to markets outside Europe.

"There's no such thing as 'I'm going to sell it and be done with it,'" said a person familiar with the industry who asked not to be identified discussing the situation. "You're going to live with it no matter what. The question is in what form."

However, Mirko Mikelic, a senior portfolio manager with Fifth Third Asset Management, which owns GM high-yield debt, argued a sale makes more sense.

Any technology or platform sharing would be negotiated in a sale and fears of a Chinese company exporting from Europe are overblown as the global auto market already is highly competitive, he added.

"It will obviously come down to price for GM," Mikelic said. "Everything's probably on the table after the U.S. government bailout."

GM received a $52 billion taxpayer-funded bailout and the U.S. government still owns a 32 percent stake in its common stock. GM shares were down 1.3 percent at $29.08 on Friday afternoon.

Mikelic added if Opel was sold, GM would then have the options of opening lower-cost assembly plants in Eastern Europe and boosting capacity at and exports from its China plants.

Meanwhile, Opel Chief Executive Karl-Friedrich Stracke on Friday redoubled efforts to pour cold water on the rumor mill as he addressed employees at the company's headquarters in Ruesselsheim, near Frankfurt.

"Stracke told us very clearly that this is nothing but speculation and that there is nothing to it," Osman Aslan, an Opel employee, told Reuters Television.

The CEO, appointed only three months ago, also talked up the company's product pipeline and said Opel's market share in Germany and Europe had risen for seven consecutive quarters.

He said first-quarter operating earnings had been "well-rounded," without elaborating.

However, some analysts said if the uncertainty around Opel drags on it could eventually hurt Opel sales.

(Reporting by Gernot Heller and Edward Taylor in Frankfurt and Ben Klayman in Detroit; Additional reporting by Soyoung Kim in New York and Jan Schwartz in Hamburg; Editing by David Hulmes and Matthew Lewis)

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Comments (1)
jhardaway wrote:
This is exactly what you get when the federal government tries to run industry. Obama’s stooge (Akerson) is “frustrated with the inability to reurn a profit” beacause Opel is not a “national champion automaker”. This coming from the CEO of a company that had to be bailed out, and still cannot produce anything remotely resembling a cutting edge product. Too bad Akerson’s not Japanese, then the board could ask him to commit ritual suicide, because that’s exactly what he’s doing to GM.

Jun 11, 2011 6:50am EDT  --  Report as abuse
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