GM, Magna reach tentative deal on Opel: sources
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GM, Magna reach tentative deal on Opel: sources
FRANKFURT (Reuters) - General Motors and Canadian auto parts group Magna International have reached an agreement in principle that could rescue ailing German carmaker Opel, sources close to the negotiations said on Friday.
The two sides have been trying to agree on a memorandum of understanding that would serve as the basis for bridge financing of 1.5 billion euros ($2.10 billion) as well as a trustee solution that would protect Opel from creditors in case parent GM files for Chapter 11 in U.S. bankruptcy court.
"A framework agreement has been reached.The goal is to work out as many of the details as possible before the meeting with (Chancellor Angela) Merkel in order to sign a memorandum of understanding today," one source with knowledge of the talks told Reuters.
(Reporting by Christiaan Hetzner, Angelika Gruber and Philipp Halstrick)
The two sides have been trying to agree on a memorandum of understanding that would serve as the basis for bridge financing of 1.5 billion euros ($2.10 billion) as well as a trustee solution that would protect Opel from creditors in case parent GM files for Chapter 11 in U.S. bankruptcy court.
"A framework agreement has been reached.The goal is to work out as many of the details as possible before the meeting with (Chancellor Angela) Merkel in order to sign a memorandum of understanding today," one source with knowledge of the talks told Reuters.
(Reporting by Christiaan Hetzner, Angelika Gruber and Philipp Halstrick)
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I still haven't figured out why Magna wants Opel. With the incredible complexity of designing and producing modern cars, many people feel that 3 million units per year is the minimum to obtain enough critical mass to keep the business viable. Opel definitely doesn't provide that. It's hard to imagine that they could survive very long by themselves. Perhaps the idea is to keep close ties with GM so that they can still share costs, resources, and platforms.
Also add in the fact that Magna doesn't have a lot of experience running a complete car business ... sure, they've done some assembly work and are a very capable Tier 1, but there's the whole integration, marketing, sales, and support issues that they've never had to deal with. At least as a part supplier, when things get tough you have the option of exiting that line of work and licking your wounds ... being a automobile manufacturer, you're in it for the long haul.
And I haven't heard mention of Vauxhall (essentially Opel's twin in England) in all of this ... does that stay with GM?
Also add in the fact that Magna doesn't have a lot of experience running a complete car business ... sure, they've done some assembly work and are a very capable Tier 1, but there's the whole integration, marketing, sales, and support issues that they've never had to deal with. At least as a part supplier, when things get tough you have the option of exiting that line of work and licking your wounds ... being a automobile manufacturer, you're in it for the long haul.
And I haven't heard mention of Vauxhall (essentially Opel's twin in England) in all of this ... does that stay with GM?
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I still haven't figured out why Magna wants Opel. With the incredible complexity of designing and producing modern cars, many people feel that 3 million units per year is the minimum to obtain enough critical mass to keep the business viable. Opel definitely doesn't provide that. It's hard to imagine that they could survive very long by themselves. Perhaps the idea is to keep close ties with GM so that they can still share costs, resources, and platforms.
Also add in the fact that Magna doesn't have a lot of experience running a complete car business ... sure, they've done some assembly work and are a very capable Tier 1, but there's the whole integration, marketing, sales, and support issues that they've never had to deal with. At least as a part supplier, when things get tough you have the option of exiting that line of work and licking your wounds ... being a automobile manufacturer, you're in it for the long haul.
And I haven't heard mention of Vauxhall (essentially Opel's twin in England) in all of this ... does that stay with GM?
Also add in the fact that Magna doesn't have a lot of experience running a complete car business ... sure, they've done some assembly work and are a very capable Tier 1, but there's the whole integration, marketing, sales, and support issues that they've never had to deal with. At least as a part supplier, when things get tough you have the option of exiting that line of work and licking your wounds ... being a automobile manufacturer, you're in it for the long haul.
And I haven't heard mention of Vauxhall (essentially Opel's twin in England) in all of this ... does that stay with GM?
The CEO of Magna has wanted his own car company for a long, long time.
I imagine this deal still includes Russian partnership and thus a built in additional market base. A Russian car maker could get a lot out of such a partnership. There's probably a million or so unit market void in Russia < but believe me, I don't really follow the actualities there>.
My guess would be that plants in Germany would be retained in a large part as it's an election year there and anyone running for office is going to be very sensitive to those issues.
It wouldn't surprise me if plant closures in Belgium and Great Britain were done as it's a more politically safe plan. Also likely that most GM management at Opel will remain from a certain level downward in the org chart.
"Tentative" is the operative term here. I imagine Magna has the most palatable offer given the dynamics of the situation.
Once again, the CEO of Magna has wanted his own car company for a long, long time and this is likely his best shot to pull it off.
Last edited by 1fastdog; May 29, 2009 at 11:41 AM.
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Sorry, but they're like locusts.
They'll come sweeping in, strip a company of all it's strong assets, contracts, and patents, then leave it a dead rotting husk while they take the important stuff to a 3rd world country. They have no regard for the people or the communities they leave behind.
If you worked for a company that was bought by them, you'd understand.
They'll come sweeping in, strip a company of all it's strong assets, contracts, and patents, then leave it a dead rotting husk while they take the important stuff to a 3rd world country. They have no regard for the people or the communities they leave behind.
If you worked for a company that was bought by them, you'd understand.
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