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Posts Tagged ‘opel vauxhall’

GM auctions Opel: A disputed bid

July 23rd, 2009 | No Comments

General Motors and the German authorities differ over Opel’s future

THE endgame to decide the ownership of Opel/Vauxhall, General Motors’ European unit, has begun. On July 20th three potential suitors submitted their final bids. Two days later GM told the Opel/Vauxhall Trust, an entity set up to run the business and administer a €1.5 billion ($2.1 billion) bridging loan from the German government while the parent company was in Chapter 11 bankruptcy, that it would pursue negotiations with two of them.

GM, which left bankruptcy a fortnight ago, has undertaken to consult closely with the governments of the countries affected, primarily Germany, which is home to nearly half of GM Europe’s 55,000 employees, but also Britain, Belgium and Spain. Next week it will report its conclusions to its main shareholder, the American Treasury. A final decision on granting one of the bidders exclusivity should be announced before the end of July. …

A disputed bid

July 22nd, 2009 | No Comments

General Motors and the German authorities differ over Opel’s future

THE endgame to decide the ownership of Opel/Vauxhall, General Motors’ European unit, has begun. On Friday July 24th GM is expected to recommend one of the final bids submitted on Monday of three potential suitors to the Opel/Vauxhall Trust. This entity was set up to run the business and administer a €1.5 billion ($2.1 billion) bridging loan from the German government while the parent company was in Chapter 11 bankruptcy.

GM, which left bankruptcy two weeks ago, has undertaken to consult closely with the governments of the countries affected, primarily Germany, which is home to nearly half of GM Europe’s 55,000 employees, but also Britain, Belgium and Spain. Next week it will report its conclusions to its main shareholder, the American Treasury. A final decision on granting one of the bidders exclusivity should be announced before the end of July. …

Opel cliffhanger

July 16th, 2009 | No Comments

It’s a pretty intense competition going on for control of Opel/Vauxhall. From what I can gather, GM in the US is having major second thoughts over selling to Magna. Now that it is out of Chapter 11, tails are perhaps up a bit at the Ren-Cen.

Losing control of its European operations might not look to clever in the future. GM is said to be keen on a buy-back clause – which is not at all attractive on the Magna side. But RHJ International might not mind that at all – in fact, its investors might be reasonably optimistic of a sizeable return and, let’s face it, they probably don’t want to run a car company for fun or the long-term.

There is a big but, though. That ‘but’ is German politics. German PM Merkel has entertained Russia President Medvedev today. Medvedev’s timing looks good, but actually might backfire. He has apparently got Merkel to voice strong support for the Magna bid.

However, that very explicit Russian political involvement might serve to highlight to the Americans at GM that they are perhaps on the verge of giving away something really rather valuable. The US financiers behind RHJ are more of a known quantity (and potentially more pliable) than the Russian interests standing just behind Magna.

The Atlantic divide here may actually be getting deeper.

So, RHJ needs to address the German question. A problem: the hard-nosed financiers may well have concluded that Opel’s biggest competitive problem is its heavy German manufacturing costs. Ah…

And from the other side, the Magna bid needs to give GM in the US more of what it wants. But Magna has Russian backers who are going all out for a strategy that could help secure a sustainable auto industry in Russia. And it also wants the rights to build and sell Chevrolet models in Russia.

Who will be first to meet somewhere in the middle? It could drag on.

Incidentally, I got the chance to drive a Chevrolet Cruze today. This car is important to Chevrolet’s future growth, globally. What’s it like? Nicely styled saloon. A bit plasticky inside (the hard plastic, that is) but it is a value brand product and is perfectly fine for the money. Myself and my co-driver Mark Bursa have fairly different body shapes, but at least it comes with an adjustable steering wheel (it took him ages to get comfortable…).

Opel jockeying

July 14th, 2009 | No Comments

I’m not surprised to hear RHJ going public this week about being at an ‘advanced’ stage in talks with GM to acquire Opel/Vauxhall. It has nothing to lose and everything to gain by talking up its position as we enter the final stages of a competition that had seemed more or less sewn up just a short time ago.

If a revised offer is coming from RHJ this week, that won’t bother GM one bit. If nothing else, it applies a bit more pressure on Magna.

Could the RHJ offer be attractive to GM in its own right?

Maybe that consideration is being taken more seriously the longer this thing drags on. If the financial terms look good, then people at GM will surely weigh up where it differs from the Magna bid. It doesn’t come with some of the potential problems – like access to technology and territorial sales issues (especially Russia) – that Magna does. RHJ could be a way for GM to keep more control of things in Europe – RHJ a compliant financial backer much more in the background than Magna would be.

But what about the underlying German politics? Magna’s bid still has plenty of support. It’s unclear whether RHJ’s bid would mean more jobs lost than Magna’s (though it is suggesting that it won’t close any plants in the UK or Germany). That uncertainty in itself will perhaps bolster the coalition behind Magna in Germany.

I wonder what Sergio Marchionne makes of it all? Is Fiat really out of it? Fiat is axing some capacity in Italy which perhaps will reassure some that the axe wouldn’t all fall on Opel under Marchionne’s plans. And maybe some in Germany will conclude that Marchionne knows how to run a car company and isn’t such a bad bet after all. Fiat could perhaps submit a revised offer, though it would be hard pressed to come up with cash on the table.

I still reckon Magna is more likely than anything else, but the longer the process rumbles on without conclusion, the more you cannot rule out another bid. Done and dusted it ain’t.

GERMANY/BELGIUM: RHJ expects to table new Opel offer

Opel Magna deal uncertainties

July 1st, 2009 | No Comments

It would seem that negotiations between Magna and GM have hit some choppy waters. GM is reportedly concerned over giving away too much technology to Magna and a prospective Opel/Vauxhall Mark 2 with its Russian connections. There’s also the issue of carving up territories for future Opel sales. GM is wary of creating a monster that hurts its own future chances in key markets.

Is the deal really moving towards being off? I somehow doubt it. The German government is still right behind Magna’s bid and has already provided bridging finance and loan guarantees for Opel. Berlin is not seeking to fuel the press speculation about other bidders being invited back to the table, though it has been acknowledging that we don’t have a done deal yet.

But it looks like there has been a bit of press manipulation emanating from Detroit. Anonymous sources said to be close to events are popping up everywhere. By creating the impression that the deal is far from done and that other bidders are very much in with a chance, GM puts added pressure on Magna in the negotiations. But if the Magna consortium bid does unravel, a whole load more uncomfortable questions get asked about other bidders, Berlin has a heart attack and, apart from anything else, even more GM management time likely gets diverted to the Opel/Vauxhall sale. They have more than enough on their plates in the Ren-Cen at the mo.

The competition for Opel/Vauxhall is still not over, but Magna’s consortium is still by far the front-runner due to its strong backing from Germany – government and labour unions. Marchionne may look on with interest, but his bid caused much consternation in Germany before and would do so again. If holding company RHJ has really improved its offer, it may well get a hearing, but it should be wary of being ‘used’ by GM as a lever to chivvy Magna. Oh, and by the way, RHJ has just posted a big loss suggesting it’s perhaps not really in position for anything more than a small role or stake. Beijing Auto? I don’t think so.

That said, if a seismic shift is coming, and Magna is really on its way out, expect an announcement very soon. Time is short. The German government needs to be on-side. And Opel is already eating into bridging finance.

US/GERMANY: GM eyes Opel deal with RHJ – report

Strange times

June 15th, 2009 | No Comments

There is something strange going on in the auto industry. Despite the talk of massive overcapacity, the impact of recession and the oft-heard conclusion that the industry will consolidate into fewer, bigger carmakers, the opposite seems to be happening.

Smaller brands – Hummer, Saturn, Saab, Volvo Cars – are being sold off by bigger groups and, apparently, finding no shortage of potential buyer interest.

And the deal that would have clearly signalled that consolidation in Europe is coming – Opel and Fiat – isn’t happening. Not only that, but the new CEO at PSA – a firm often identified as a potential alliance or merger suitor for Fiat – has more or less said that size isn’t everything and that PSA can survive as an international business by focussing on growth markets.

Is that it then? Consolidation and rationalisation of production isn’t as pressing as some have been saying?

I don’t think so. But it’s also a more complex situation than it appears at first sight.

For example, if GM, with all its resources, couldn’t make Saab work, why should anyone else? Fair question, but an alternative business model that recognises past weaknesses and that perhaps comes with a sizeable initial dowry of assets from GM, might just be able to work.

Similarly, in looking at Magna’s proposed deal to acquire Opel/Vauxhall, the position of New GM is highly significant. If a close relationship continues across the Atlantic concerns over the new European entity developing new product ease somewhat.

I can’t help thinking though, that with the industry’s total volume pie in Europe suddenly quite a bit smaller, the overcapacity bullet will have to be bitten somewhere, sooner or later.

A lot has to transpire before we can see the extent to which the pain is shared.

JD Power estimates that capacity utilisation at Europe’s car plants currently stands at around 50% – versus 80% as recently as 2007. JD Power’s baseline forecast has a return to an 80% capacity utilisation ‘norm’ in 2016. A rule of thumb is that car plants break even at 60-65% capacity utilisation.

There won’t be much recovery to capacity utilisation from the current 50% this year or next on current market assumptions (in 2010 Europe’s car market will likely decline after this year’s scrappage-inspired boost). Conditions are therefore clearly ripe for further capacity rationalisation.

Manufacturers who ignore these fundamentals impose higher costs on themselves and impair their ability to be competitive – a sure recipe for potential long-term decline and eventual exit from the industry.

ANALYSIS: The age of deconsolidation