BAIC bid for Opel sees fewer job cuts, China growth

An Opel car is parked in front of the Opel assembly plant in Antwerp June 15, 2009.

BERLIN (Reuters) - Chinese carmaker Beijing Automotive (BAIC) offer document for General Motors' GMGMQ.PK Opel unit aims to outmaneuver Canadian rival Magna (MGa.TO) by requiring less state aid and fewer job cuts in Europe.

BAIC's non-binding offer document, which was addressed to GM on July 2 and obtained by Reuters on Tuesday, shows that the state-owned group would use Opel's brand and technology to tap the huge and growing Chinese market and sell nearly half a million cars there.

It also entails a long temporary plant closure at Eisenach, in Thuringia, however, which raised opposition from the local state economics minister.

BAIC's plans, which could make Opel a major player in China by 2015, hinge on GM agreeing to share cutting-edge technology such as fuel cells and hybrids.

These powertrains cut pollutants sharply while reducing fuel consumption, a key interest for the Chinese government.

"As you may know, industrialization of a developing country such as China needs to have access to intellectual property. This is a top priority for the Chinese government ... This is the key driver to Beijing Auto's potential acquisition of Opel NewCo," the offer to GM states.

German state and federal governments have financed a 1.5 billion euro bridge loan to Opel that expires at the end of November and want to close a transaction by then at the latest, and there are worries in Berlin that the notoriously long approval process in China could stretch beyond that date.

"We expect the closing of the transaction will be subject to ... the approval of several Chinese regulatory authorities, which will be expeditiously obtained after signing," BAIC wrote.

BAIC's plan would give BAIC 51 percent and GM 49 percent of the new Opel.

Berlin and GM have been building up offers from BAIC and financial investor RHJ International (RHJI.BR) as potential winners for Opel, but Magna remains the clear frontrunner.

A senior minister in the German state of Thuringia, which is helping keep Opel afloat, opposed the BAIC offer on Tuesday and backed Magna as the favorite.

BAIC would temporarily cease Corsa production in Opel's Eisenach plant in Thuringia until 2012, rendering 1,800 staff out of work for years but still on the company's payroll.

"The BAIC offer is completely out of the question," state Economics Minister Juergen Reinholz told Reuters on Tuesday.

"Germany has made it clear that state loan guarantees will only be offered if all plants are kept open. Even a temporary closure is not an option."

A spokesman for General Motors Europe said the company was continuing negotiations with all parties and would not comment on specific bids. Labour representatives at Opel continued to signal their support for Magna on Tuesday.

Magna, the Canadian automotive supplier, is counting on the potential of the Russian market. It intends to take a 20 percent stake but have its Russian banking partner Sberbank (SBER03.MM) hold 35 percent of Opel, giving them a combined majority.

BAIC would invest 660 million euros for the majority stake in Opel and would need a six-year loan of 2.64 billion euros at an expected interest rate of 8.1 percent, which would be guaranteed by European governments.

BAIC valued Opel at 515 million euros and assigned it an enterprise value of 4.45 billion euros as of the end of May.

Magna wants 4.5 billion euros in European state aid to help restructure Opel and make it profitable in about two years.

CHINA PLANS

BAIC intends to use key technology from General Motors to help it sell nearly half a million Opels in China by 2015.

It plans to build up a network of 400 dealerships in China that could sell an annual total of 485,000 units of Opel Corsa, Meriva, Zafira, Antara, and the old Vectra models in China.

After initially importing a total of 60,000 Opels into China in 2010 and 2011, it wants to invest $2.25 billion overall into domestic production due to begin in 2012.

Output would start at 200,000 units before growing to a capacity of 500,000 vehicles annually by 2015.

BAIC plans to reduce Opel's manufacturing footprint in Europe by eliminating 7,584 jobs, including just over 3,000 in Germany alone.

The Magna plan foresees just over 10,000 job cuts in Europe, German government officials have said. Opel employs a total of 25,000 staff in Germany and roughly double that in Europe.

Under the BAIC plan, some 1,300 jobs would go in Zaragoza, Spain, 1,608 in Bochum and 1,160 in Opel's main German site in Ruesselsheim.

It plans to stop production at Opel's Antwerp plant until the end of March 2010 and cut 2,446 jobs in Belgium, warning it would "contemplate" closing the plant permanently.

(Reporting by Gernot Heller, writing by Christiaan Hetzner and Noah Barkin, editing by Will Waterman)