Analysis
By Jorn Madslien
Business reporter, BBC News

The long, drawn-out negotiations surrounding the sale of Opel and its Vauxhall division in the UK are characterised by conflicting ambitions and a set of reluctant participants.

General Motors (GM) is the reluctant seller.

The US automotive giant is having to hive off a majority stake in its European divisions – and thus accept that it is no longer the world’s largest automotive group – as part of a restructuring programme put in place in the wake of GM’s bankruptcy filing in May.

But it is not happy about it, not least because it faces the prospect of one day competing with Opel, both at home in the US as well as in emerging markets, notably Russia.

The German government, meanwhile, is a reluctant participant in the saga, having stepped in with a 1.5 billion-euro (£1.3bn) bridging loan to prevent the company collapsing.

Collapse would lead to the closure of Opel factories and the loss of thousands of German jobs in the run-up to the election on 27 September.

Germany is also prepared to add 3bn euros of loan guarantees to the new owner, in addition to the bridging loan.

Together, GM and Germany are stakeholders in a trust that was created to own a 65% stake in Opel until a sale had been completed.

And a sale, say industry observers, will not happen anytime soon – in spite of Monday’s deadline for potential buyers to get their binding bids in.

Reluctant assistance

On Wednesday, the two will assess the three bids it received on Monday – from the Austrian-Canadian car parts maker Magna, in a consortium with Russia’s Sberbank and Oleg Deripaska’s truck firm Gaz, from Brussels-based private equity-backed RHJ International and from China’s Beijing Automotive (BAIC).

Though very different in character, each bid has merits, so the final outcome remains uncertain.

• Magna and its Russian partner Sberbank’s are offering 750m euros for a 55% stake – split equally between the two with 27.5% each. They would require Germany to guarantee loans of some 4.5bn euros. This bid is widely seen as the front runner.
• RHJ wants a 51% stake in return for 175m euros now and a further 100m euros tranche on 31 December 2012. It would require 3.8bn euros in loan guarantees from Germany.
• China’s Beijing Automotive (BAIC) has not released details of its bid, but it is reportedly sweet at some 660m euros for a 51% stake. Moreover, it is said to require just 2.6bn euros in loan guarantees from Germany.

GM and the German government are in no position to agree on who to sell to just yet, however.

First they must consult the governments of countries where Opel or Vauxhall has plants, namely the UK, Spain, Belgium and Poland.

The European Commission will also have a say, since all these countries may wish to – albeit reluctantly – step in with further financial assistance to help a new owner safeguard jobs. The Commission will have to consider whether such state assistance is acceptable.

And do not forget Washington. The US government owns 61% of GM, which recently emerged from bankruptcy, and will need to be consulted.

Global battle

In addition to the need to consult governments about loan guarantees and suchlike, a geopolitical contest between the US, China and Russia, arranged by a European host, is emerging.

All four are eager to protect jobs in their own countries or regions, at some cost to tax payers.

• GM, which is now 61% owned by the US government – has hinted that it believes the RHJ bid could be a real contender to the Magna bid.
• The BAIC bid’s relatively low reliance on German loan guarantees is seen by some as an indication of Chinese government backing, though even if such support is not explicit the company’s global ambitions for the Opel brand would fit neatly with those of the nation.
• Russia hopes Sberbank’s bid will enable it to share in Opel’s sales growth once the Russian market eventually bounces back from this year’s slump. In 2009, Russian car sales are expected to halve or worse.
• Germany, which favours Magna, seems prepared to accept that the Kremlin will have a finger in the pie as long as Magna’s industrial ambitions are given breathing space. Magna has said it will new models and seek to develop Opel further.

Political solution

And in the end, the German voice will probably carry the most weight, since it is providing the 4.5bn-euro loan guarantee. If Germany is not happy about the way GM deals with the affair, it could – at least in theory – withdraw the offer.

The most likely outcome, therefore, is a sale to Magna and Sberbank, though perhaps only after GM has secured further concessions.

Industry observers say the biggest risk to the Magna deal is that GM’s demands become so onerous that they simply walk away.

Either way, a buyer is expected to be chosen by the end of July with a view to have a deal agreed by 31 October.

If the issue drags on beyond the German election, expect the Germans to start playing hard-ball. By then, the cost to German tax payers may be as much of a concern as jobs to the government.

If so, the issue may well become a topic of discussion between the German Chancellor and the President of the United States.</p

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