Opel future hangs in the balance
May 28, 2009 by David Twomey
The fate of Opel/Vauxhall, the beleaguered European subsidiary of General Motors, hangs in the balance after 12 hours of talks broke down with GM revealing the company needed an extra 300 million Euros (US$415 million) to survive.
By David Twomey in Berlin
At the same time the talks did narrow Opel’s suitors down to two companies, Italian carmaker Fiat and the Canadian parts supplier Magna, when bids by Belgium-listed holding RHJ International SA and China’s Beijing Automotive Industry Corporation were rejected.
Fiat’s race to win control of Opel is part of Chief Executive Sergio Marchionne’s ambitious attempt to build an automotive alliance that could rank as the world’s second largest by sales behind Japan’s Toyota Motor Corporation.
Fiat has an ambitious plan to fold Opel and other GM Europe brands Vauxhall and Saab into a transatlantic car empire that would also include new US partner Chrysler.
German ministers said after more than 12 hours of talks stretching well into Thursday morning here, that they had been unable to reach a deal to provide Opel with temporary financing if GM files for bankruptcy in the United States.
“We have made demands on the U.S. Treasury and expect answers by Friday and we will need these answers in order to agree a plan,” Economy Minister Karl-Theodor zu Guttenberg said.
“We don’t have the security yet that we need to commit to bridge financing today.”
Finance Minister Peer Steinbrueck spoke of “surprises and disappointment” with the US negotiators, saying GM had shocked participants by announcing it needed 300 million Euros (US$415 million) more in short-term cash.
Choosing a final bidder for Opel and closing a deal could take months, time that neither the carmaker nor the German government have with GM expected to file for bankruptcy in days after a crucial bond exchange proposal failed.
To tide Opel over, Germany has put together a 1.5 billion Euro (US$2.1 billion) aid package, but has made this aid contingent on the US government and GM agreeing to its plan to temporarily place Opel assets in a trust, a move that would protect its patents and technology from GM creditors.
Mr Steinbrueck said he was hopeful a deal could be reached on Friday that would save Opel.
German Chancellor Angela Merkel had called the meeting to agree a plan to keep the carmaker running while negotiations with suitors are finalised
Opel traces its roots in Germany back to the 19th century and employs about 25,000 staff in four plants here. Its future has become the focus of a furious politically charged debate in Berlin ahead of a federal election in September.
The German led talks have caused some disquiet in other European capitals with leaders in Britain and Belgium complaining that the Germans are ignoring the 30,000 Opel/Vauxhall workers who are employed in countries outside of Germany.
In defence of the Germans it must be said that they are the only ones to have made any attempt to work out a solution for Opel/Vauxhall.
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Very sad, as Opel have some pretty decent products in their lineup.
The big issue here is nobody seems to be realising that with world car-making capacity about 30% over what is needed for the medium term there are going to be some casualties. Why is there always somebody (Fiat, the US Govt. or whoever) wanting to prop these dinosaurs up so that they can keep making cars that are excess to requirements.
Just let the stronger players deal to the customers that are still out there I say, and save everyone from even greater grief in the future.
What I don’t understand is that even before this economic crisis Opel was slowly drowning, racking up multi-billion dollar losses with not one year of profitability since at least 2001 (financial data is not available beyond that). Yes, GM have probably restricted them with their mismanagement, but this is a brand that has shrunk from 13.9% marketshare to 8%, facing a possibly long term reduction in the overall market size before the economy fully recovers. They themselves have massive overcapacity, and yet the German government and unions seem intent on avoiding the necessary course of action. Either scuttle it and remove a large chunk of overcapacity in the overall automotive industry, or allow Fiat to get in there and cut away at some of that inefficiency and at least have a small, profitable version of Opel remaining. Any other course of action will only prolong Opels suffering, and that of the German tax payer.
I don’t believe Fiat is acquiring all these failing car companies in order to put them to sleep and lose money.
It would be interesting to know the vision of the Fiat boss and how he sees his final structure making money.
If there was money to be made, Warren Buffet would be buying up all these failing companies, but he’s not, so in my view there is a huge crash coming for Fiat, bigger than the sum of all the smaller contributing crashes…..
Reckless1 – Fiat are in a very strong financial position. They have been making BIG profits in the last few years (and are still doing so despite the downturn). Also, because they have what the automotive world regards as the best small car technology now on offer, they are well positioned for the downsizing that the world wide car buying public is moving towards. Unfortunately in Australia, they are regarded poorly because of their past history (well deserved)and such small sales. (In Brazil, Fiat is the biggest seller of cars.) Their products are outstanding nowadays . Indeed, the NRMA officially declared the fiat 500 1.3 diesel Australia’s most economical car, knocking Toyota with their Hybrid off the mantle.
Sergio Marchionne has been the best automotive GM in the last decade as far as I am concenred. He has turned Fiat around from an almost dead horse to a cutting edge company that is turning out money making cars the world wants. In the process he stitched up GM for over US $1billion doallrs through a put option deal retiring Fiats debt, organised alliances around the world and played on fiats small car technology strengths. His only dissapointment hae been the sales of Alfa, despite the cars actually been rather good nowadays. However, he is on to this and there are a raft of new Alfa cars coming with some tasty technology.
GM is letting go of one of the best brands in its stable.
Opel products are far superior to anything GM has to offer in the USA.
GM should have brought Opel to the USA and shut down some of their dodgy brands a long time ago.
I guess it’s mistakes like this that are forcing GM in to bankruptcy. I can’t say I feel sorry for them at all. Most of their cars are rubbish and the same can be said for most of their decisions in the past.
I only feel sorry for the workers that will lose their jobs because of GM’s incompetence.
Yianni, did you ever think of the thousands of employees that GM has paid for the best part of a century due to their competence/incompetence?
While you are feeling sorry for those who may lose their jobs, you might also sing the praises of GM for those people whose whole lives were supported.
The throwaway comments of some people are just asounding.
Oh get over yourself, Reckless. There’s nothing wrong with Yianni’s comments. Geezes some of the regular posters here irritate me – you carry on like you own this website.
Hey, nobody’s listening. Take another deep breath and go back to the beginning of this thread.
Perhaps we loose sight of the fact that GM was very sucessful for many years and only second to Toyota in overall worldwide sales.
Main difference as I see it is that Toyota has a far more efficient model lineup across the world i.e common platforms/components and far less models than GM worldwide which must see Toyota well ahead in terms of cost per unit and the economies of scale producing less variants enabling them to still cover their production costs despite falling sales worldwide.
Hard to imagine how Fiat could keep their cost per unit down by embracing the same type of brand merchandising that has brought GM to it’s knees.
I just read some breaking news on autocar.co.uk that Magna have signed a contract to buy Opel and Vauxhall whether GM files for Chapter 11 or not. If that’s right, that’s very good news in my eyes.
Hmm Frustrating how much miss / partial information is floating around out there in CyberSpace!
Johnno, FIAT are NOT in a strong financial possition! Not taking anything away from Sergio and his drive to grow his company, Fiat has not been able to bring any money (of real value) to the table when in talks with GM/OPEL. All of its tenders put forward have relied upon guarantees from the EU and around 6bil Euro’s in loans/ lines of credit whatever you call them.
The Captain is correct in his view that we are oversupplied in vehicles, and it is the companies that are the Johny come lately’s that have caused the problems. Whilst it is easy to blame the older manufacturers, the culprits are those countries like Korea and China who have jumped on the band wagon to produce vehicles styled to look modern without the real substance of the established players, using factories without the enviromental controls and working conditions imposed on the rest of the world, with protectionism the likes the western world hasn’t seen since the mid 80’s. To claim that Opel, Ford and the others are the culprits is plain wrong! Try to buy a Fiesta Zetec right now, 4 months waiting list (built to order). Was a similar situation with the Astra (2 months on upper models) same for most Euro brands. WHen was the last time you had to wait over 1 month for a Japanese or Korean sourced car? What manufacturer has over 15 acres of cars on a wharf awaiting shipment just to dealers let alone new homes. If you are buying Asian cars I would be careful to look at the build date plate compared to the compliance date before I took delivery.
Frontman Says:
May 30th, 2009 at 9:22 am
If you are buying Asian cars I would be careful to look at the build date plate compared to the compliance date before I took delivery.
Good advice Frontman. In fact that applies to any car, no matter where the origin.
And so the deal is done.
35% to the Russian companies, 20% to Magna, 10% to the Unions, and GM keep 35%.
Interesting to note that Opel are losing $A5.33 million a day.