Magna gets early nod in race for GM's Opel

BERLIN (Reuters) - Magna International MGa.TO emerged on Friday as a favorite to acquire General Motors' GM.N Opel unit after top German officials said the Canadian car parts group had submitted a better plan than rival bidders Fiat FIA.MI and Belgian-listed private equity investor RHJ International RHJI.BR.

At a briefing in Berlin, Magna co-Chief Executive Siegfried Wolf laid out the company’s Opel plan for the first time, confirming it aims to team up with Russian partners but leave existing GM Europe managers to run the new group.

Crucially, Wolf vowed to retain all four Opel plants in Germany, where politicians face a federal election in September.

Late Friday, Magna said confirmed had teamed up with Russian bank Sberbank Rossii to submit a “non-binding indicative” offer to invest 700 million euro ($980 million) in Opel. It also said a portion of its investment would be guaranteed by the German government.

Under the offer, GM would keep a 35 percent equity stake in Opel, while Sberbank would take 35 percent, Magna would get 20 percent and Opel’s employees would get 10 percent, Magna said in a statement.

“Under our concept the German sites are seen as assets and we want to keep as many jobs as possible,” Wolf said. “There is a lot of know-how within the German Opel plants.”

German Economy Minister Karl-Theodor zu Guttenberg emerged from a meeting of top ministers at which the offers were evaluated and said none of the bidders had been ruled out, but that the Magna offer had strengths.

“It would be premature to write anyone off. But it is true that we have heard many concrete things from Magna,” he said.

German Foreign Minister and Vice Chancellor Frank-Walter Steinmeier described the Magna bid as the only “sustainable” plan among the three and said it would be examined closely.

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Both ministers said a decision on a preferred bidder would come next week after another meeting of ministers on Monday.

But premiers of the four German states where Opel has plants had diverging views on the Magna plan. Most backed it but Juergen Ruettgers, premier of North Rhine-Westphalia (NRW), said it was unacceptable and needed changes.

Fiat Chief Executive Sergio Marchionne was cautious about the prospects for his company’s bid in brief remarks to reporters.

“It’s hard to say how it will end up,” he said in Rome on Friday on his way to a dinner with bankers. “It’s a complicated business because this is an election year in Germany.”

He had been quoted in the Italian press on Thursday as saying Fiat’s chances were better than 50 percent.

Opel unions also voiced opposition to the Canadian firm’s plan, under which about 10,000 jobs would be cut in Europe, including some 2,500 in Germany. All but a few hundred of those would come from the Bochum plant in NRW.

Outside of Germany, GM Europe has plants that employ a combined 15,000 in Spain, Poland, Belgium and Britain, where British Vauxhall-branded versions of Opel vehicles are produced. Sweden’s Saab, also part of GM’s assets in Europe, is being sold separately.

Magna International Inc. Chairman Frank Stronach speaks during the annual general meeting of shareholders in Toronto in this May 6, 2009 file picture. REUTERS/Mike Cassese/File


Both General Motors and the German government are in a race against time to finalize a sale of Opel, which is headquartered in Ruesselsheim, near Frankfurt, and traces its roots in Germany to the 19th century.

The U.S. government has given GM until June 1 to restructure its operations or face bankruptcy.

The decision on who gets Opel will be made by GM but the German government will also play a big role because it is expected to provide billions of euros in financing guarantees to the eventual winner.

The bidding process for Opel has been colored by a politically charged debate in Berlin ahead of the federal election.

Chancellor Angela Merkel’s conservatives, including Guttenberg, are keen to preserve Opel jobs but want to limit the state’s role in any rescue.

The rival Social Democrats (SPD), led by Steinmeier, say the government should do all it can to save Opel and have sought to portray Merkel as insensitive to the fate of its workers.

Marchionne has led a public relations campaign in recent weeks, racing around in a Maserati and his trademark wool sweaters to meetings with top government officials.

Italian Foreign Minister Franco Frattini said late on Friday that Fiat’s chances were 50:50 and dismissed talk Magna’s bid would be successful as “preliminary skirmishing.”

Marchionne wants to create the world's second biggest carmaker behind Japan's Toyota 7203.T by adding the assets of Opel and Vauxhall to a stable that includes the brands of Fiat and U.S. carmaker Chrysler CBS.UL.

The company has said it foresees less than 10,000 job cuts in Europe, but Germany would be harder hit than under the Magna plan, several politicians said.


The Fiat plan is seen by some in Germany, including Opel unions, as overly ambitious and unwieldy.

In addition, Fiat has told the German government it would need up to 7 billion euros in support from relevant governments, about 2 billion more than Magna and RHJ say they require.

Wolf said that under Magna's plan, Russian carmaker GAZ GAZA.RTS would be an industrial partner and the goal would be for Opel-GM to gain a 20 percent market share in Russia in the short term and eventually sell 1 million vehicles there.

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Additional reporting by Philipp Halstrick in Frankfurt, Andreas Moeser and Matthias Sobolewski in Berlin, Dmitry Sergeyev in Moscow, Silvia Aloisi in Rome and Wojtek Dabrowski in Toronto; Writing by Noah Barkin; Editing by Greg Mahlich, Brian Moss, and Rob Wilson