| In February 2009, as General Motors plunged to wards bankruptcy and declared it was seeking investors for its 80-year-old European Opel business, investors showed their interest in one of the continent's biggest carmakers - suddenly for sale at a give-away price.
On May 20, 2009, the deadline which had been set by the German government, there were three companies vying for Opel - Italian Fiat, Canadian Magna, backed by Russia's Sberbank and Belgium's RHJ. Magna International emerged as a favourite to purchase General Motors' Opel unit after German officials said that Magna had submitted a better plan than the rival bidders. Afterwards on May 30 the German government approved Magna's bid for Opel. It was announced that under the agreement, Magna would take a 20 percent stake in Opel and the Russian-owned Sberbank would take a 35 percent stake, giving their consortium a privilege. GM would retain a 35 percent holding, while the remaining 10 percent would go to Opel employees.
However, on June 11 it became known that Germany was still negotiating with potential Opel investors, even after reaching a preliminary agreement with Magna International Inc. So, for final bids a July 10 deadline was set by GM. Canadian car-parts firm Magna in league with Sberbank, and Belgian investment holding RHJ were in a two-horse race to take over Opel from its owner. But just before a deadline set for prospective buyers Chinese automaker Beijing Automotive Industries Corp. (BAIC) had joined the bidding for General Motors Corp.'s German unit. Nevertheless, BAIC lost the battle for Opel. Despite the fact that Beijing Auto's bid offered more cash and asked for less government aid than other bidders, it failed because it could not come to an agreement with General Motors over intellectual property rights to car designs and technology. More-over, the fact that BAIC would drop out of the Opel race was predicted because GM would inevitably have faced strong competition from the Beijing-based automaker on the Chinese market if the US car maker had sold Opel to BAIC. There is no doubt that GM's board did not want to create new problems for the company.
So, on July 23 GM agreed to continue detailed talks with both Magna and RHJ International, a Belgian holding company with very strong links to US buyout firm Ripplewood. Thus, the fight for the German brand was then down to those two companies. Within several days, both Magna and RHJ submitted improved bids for Opel On the face of it, there was little difference between key parts of the proposals. Both resulted in about 10,000 job losses, though RHJ planned more fundamental restructuring that could imply more jobs lost. Both required substantial loans from the German and other European governments: RHJ wanted € 3.8 billion and Magna € 4.5 billion. Both bidders planned to put in some cash of their own: Magna and Sberbank were ready to invest up to € 700m, whereas RHJ promised € 275m. Magna intended to hold 27.5% of the equity, Sberbank the same and GM 35%. RHJ envisaged holding 50.1%, leaving 39.9% for GM. Both put aside 10% for employees [1, P. 59].
Each of the two bidders had important supporters. Magna was the preferred choice of the German Chancellor who was thought at first to have favoured a proposal by Fiat. But since the Italian company dropped out of the bidding, she took Magna's side. GM, in its turn, was for RHJ. But that was not because RHJ's bid looked more tempting. GM was less enthusiastic about the Magna plan. From the very beginning of the Opel deal General Motors found itself at odds with the German government. The latter worried about job security for Germany's Opel workers; the former wanted to avert large losses of a business in which it would maintain a stake. Although General Motors was the one to make the final decision on who would buy Opel, the German government also had a significant voice in the matter. The German government's choice was crucial because Opel had its headquarters in Germany, and 25,000 of the firm's 50,000 workers were German employees [6]. As a result, the German government provided loan guarantees and helped finance the final bid.
Opel's sale became a politically charged topic of debate in Germany ahead of a parliamentary election on September 27. Magna's victory was seen as a welcome outcome for German politicians who strived to save as many of the 25,000 jobs at Opel's four German factories as possible so that they could gain points before national elections. The German government reckoned that Sberbank as a state-owned bank which backed Magna would not collapse in the financial crisis and keep its promise. They considered it as a guarantee for some kind of success. Besides, from the standpoint of German politicians, one more attraction of the Magna proposal was that it imposed a heavier burden on Opel's foreign sites than its German ones. It called for closing the company's plants in Antwerp, Belgium, and Luton, the UK. Production was supposed to be scaled back at non-German plants, such as Zaragoza, Spain, and shifted to Germany.
But was it only Magna's pledge to avoid great layoffs that encouraged German government to promote a consortium headed by Magna? Actually, it was no longer about limited job cuts. As more details emerged about the negotiations over the sale of GM's European division, it was becoming clear that strategic interests of German foreign policy were playing an increasingly important role. On August 14, 2009 the Chancellor of Germany met with the President of the Russian Federation. During negotiations the Russian President held out the prospect of finding Russian investors for struggling firms such as Dresden chipmaker Qimonda and Germany's fifth biggest shipbuilder Wadan, something the Chancellor had a strong interest in. The shipyards in question were in the immediate vicinity of her voting district. The German Chancellor, for her part, promised Russia's President that she would intervene personallyto support Magna's bid.
However, the Americans were not greatly moved by the Chancellor's electoral needs. Opel still belonged to an American automaker, and GM bewared of the Magna plan.
Magna's business plan for Opel hinged on securing the future of General Motors' European unit by expanding its business in Russia with Russia's second-largest carmaker Gaz, where Magna already had a presence. Russian state-controlled Sberbank welcomed the agreement as a way to restructure the Russian automotive industry. Sberbank's Chief Executive Officer said he wanted his company, which is one of the largest creditors of the Russian vehicle industry, to do its part to help restructure Russia's ossified automobile industry. He said his company was purchasing one of the most technologically advanced European automakers at an unprecedentedly low price [8]. Russian government did want to see the German carmaker play a future role in developing national automobile industry. In other words Russia was eager to see Opel's know-how pumped into ailing carmaker Gaz, which had suffered immensely as Russian automobile buyers mostly preferred more technologically advanced models from overseas. Instead of reinventing the wheel Russia decided to take the best practices and apply them in the national car industry. Thus, with € 4.5bn of European government guarantees, Sberbank's financial backing and the Kremlin's welcome, Magna intended to bring the Russian car industry back from the brink of bankruptcy by giving GAZ the access to technology and boosting output at its plants.
General Motors was reluctant to sell Opel to Magna because it worried about the wholesale transfer of its intellectual property to Russia. It feared it could lose control of or even access to some technology Opel developed at a great expense, such as clean diesel engines. GM was concerned about creating a rival in Russia despite having kept a stake in the "new Opel". GM had been selling its Chevrolet brand on the Russian market for about five years and Magna could potentially become a strong competitor. Magna expected to see Opel's market share grow from 3 to 20 percent benefiting from Gaz's broad dealership network.
The issue of intellectual property leakage was a key point to deciding who should take over Opel. Unlike Magna, RHJ was only interested in turning around the carmaker and offered GM the right to buy back its shares later. As a result, GM's board was even about to reject Magna's bid. But on August 19 the German government spoke out in support of Magna. It claimed it would provide 4.5 billion euros in state aid for Opel without help from other European governments only if GM chose Magna as the buyer [10]. GM seemed to have come to the conclusion that it had no option but to do a deal with Magna. Thus, on September 10 General Motors agreed to sell a 55 percent stake in Opel to a group led by Magna International. Under the deal, GM retained a 35 percent stake in Opel, with Magna and Sberbank each taking 27.5 percent and workers the remaining 10 percent [7].
Though the binding agreement on the sale has not been signed yet, General Motors excludes the possibility of withdrawing the deal. The American automaker plans to finalize the sale of its Opel unit to Magna International Inc. as soon as November 2009, and when the deal is signed, interested parties will get what they have strived for [3]. Berlin will have the investor whose offer has been the closest to the hopes and wishes of German politicians and employees to safeguard German factories and jobs. Sberbank will acquire access to technology to turn around Russian car sector. Magna will also get what it craves - a brand, technology and distribution network that will enable it to expand beyond being just a car parts firm into an auto company in its own right.
REFERENCES
1. GM auctions Opel: A disputed bid // The Economist. - 2009. - Vol. 392. - N° 8641. - Pp. 58-59.
2. GM rethinks the sale of Opel: Looking for reverse // The Economist. - 2009. - Vol. 392. - N° 8646. - Pp. 51-52.
3.Agreement on Opel deal faces delay.-2009.-http://www.ft.eom/cms/s/0/19bbeela-b9ab-llde-a747-00144-feab49a.html (15.10.2009).
4.German Plans for GM's Opel Go Awry.-2009.-http://www.businessweek.com/globalbiz/content/sep2009/gb2009092_910382.htm (10.10.2009).
5. GM and Opel: Magna force.-2009.- http://www.economist.com/businessfinance/(30.09.2009).
6. GM ponders future as deal fails. - 2009. -http://news.bbc.co.Uk/2/hi/business/8069680.stm (30.09.2009).
7.Javier Espinoza and Parmy Olson. Opel Goes To Magna.- 2009.- http://www.forbes.eom/2009/09/10/gm-opel-vauxhall-markets-equities-decision.html (30.09.2009).
8.Opel and the Kremlin: Risks Ahead for Germany?-2009.-http://www.businessweek.com/globalbiz/content/jun2009/(03.10.2009).
Научный руководитель – ст. преп. Лахотюк Л.А.,
ст. преподаватель ИИП НИ ТПУ |
