Standoff emerges over GM's sale of Opel

BERLIN/FRANKFURT (Reuters) - A crippling stalemate between General Motors and Germany could be emerging over their preferences for competing bids between RHJ International (RHJI.BR) and Magna (MGa.TO) to buy GM's European carmaker Opel.

Both GM and Berlin want to see a deal signed by the end of this month, but growing divisions between the former parent and the likely financier suggest a nail-biting conclusion to a transaction where Canadian auto parts maker Magna has long been heavily favored.

Essentially, RHJ's plans foresee shrinking Opel's production footprint to a more manageable level whereas Magna is focusing on growth in the dynamic, but volatile Russian market.

A source familiar with the details of the two offers told Reuters that GM had only minor issues left to clarify with private equity buyer RHJ over a sale of a majority stake of its Opel unit ahead of a Monday evening deadline to submit bids.

"The advantages of RHJ's offer is that it is a much simpler deal, requires less taxpayer money, plans to pay it back quickly and foresees a relatively more aggressive restructuring of Opel," the person said, adding GM would have the possibility to buy back the stake by an eventual exit.

"They get to set the price, GM can elect to take it or not."

Leaning toward RHJ -- a little known investment vehicle that has risen to prominence with its headline-grabbing bid for Opel -- could be just a credible attempt to force more concessions from Magna.

Magna's Austrian co-chief executive, Sigi Wolf, nonetheless enjoys unwavering support from Opel's labor leaders, regional governments home to the carmaker's plants and Germany's junior coalition partners, the left-leaning Social Democrats.

Chancellor Angela Merkel said on Thursday that the bid from Magna's Russian-backed consortium offered "excellent starting points," and a day later her spokesman said Berlin had a "certain preference" for the concept.

RHJ is loosely tied to U.S. private equity firm Ripplewood, and used to be called Ripplewood Holdings Japan. RHJ, which still accounts for its books in yen, doubled its fiscal year loss to an amount equivalent to 1 billion euros ($1.41 billion).

"A decision by GM and the German federal government for RHJ would be a declaration of war on the employees of Opel. The IG Metall trade union will not support this concept or its bidder," Opel board member Armin Schild told Reuters.

The pursuit of Opel is part of a broader consolidation of the auto industry in Germany and beyond, triggered by a crisis in global car markets that pushed GM into a fast-track bankruptcy at the beginning of June.

RHJ BORROWS GM PLANS

German federal and state governments acquiesced to providing a 1.5 billion euro bridge loan in return for the sale of a 65 percent stake to a trustee, ringfencing Opel in an eleventh-hour solution hours before GM filed for Chapter 11.

The myriad of vested interests make the sale highly complex.

GM's negotiating team wants to evaluate Monday's bids before gathering feedback from Germany's state and federal governments, European countries also home to Opel plants and the European Union starting next Wednesday through Friday, the person familiar with the details said.

The week after next both the U.S. government and GM's own board would discuss the recommendation, based on how much government aid is required, how soon it would be paid back and finally what is the U.S. carmaker's own best interest.

The Opel Trust will have to approve a deal at the end of July.

With total assets of just 2.7 billion euros at the end of March and heavy losses from its holdings in minor car parts suppliers, RHJ seems an unlikely candidate to invest 275 million euros in a major auto manufacturer like Opel.

Its non-binding offer document, entitled "Project Beam" and obtained by Reuters on Friday, is based heavily on GM's previous European restructuring plans with some statistical deviations on market and volume assumptions.

Opel's Antwerp plant would be closed by March 2010 while Eisenach in Germany would be idled for two years -- an identical measure that Beijing Automotive, a distant third bidder, has also planned.

"It is the old concept of GM Europe from (manufacturing boss Eric) Stevens," Opel labor leader Klaus Franz told Reuters, adding that key product investments would be stricken.

RHJ would cut 3,900 jobs in Germany out of 9,900 overall, helped by 3.8 billion euros of loans it wants guaranteed by European governments.

Magna's staff reduction plans are similar in size but foresee only around 2,500 cuts in Opel's home market of Germany. It wants some 4.5 billion euros of state-backed loans, however.

(Additional reporting by Rene Wagner and Angelika Gruber; Editing by Steve Orlofsky)