Interesting that the ‘serious’ newspapers — the FT and Sunday Times — have run a version of our Vauxhall/Opel sell-off story from last week’s mag.

For those that didn’t see it, Vauxhall/Opel’s buyer is now most likely to be a company called RHJ International, a Belgian holding company with very strong links to US buyout firm Ripplewood.


These reports are significant, because this week is meant to mark the final, final deadline for the Vauxhall/Opel sell-off. Although my experience of reporting similar stories in recent years suggests we treat the word ‘final’ with some scepticism.

The Canadian/Russian bid from Magna/Sberbank has fallen out of favour for various reason, not the least of which is that GM fancies buying back Vauxhall/Opel in a few years time.

I’m told that a buy-back clause for GM to take back control of Vauxhall/Opel is a key part of the sell-off documentation and the Russians/Magna aren’t too keen on it.

Apparently GM’s high-ups in Detroit have also found it much easier to negotiate with RHJ than the Russians, largely because RHJ is run by Americans, namely the financier Tim Collins, who also founded the Ripplewood buyout fund.
The German Unions are said to favour RHJ, too.

A couple of years ago, Ripplewood was one of the bidders for Jaguar Land Rover and enlisted former Ford CEO Nick Scheele to guide its ultimately unsuccessful bid. Former Chrysler exec Tom Stallkamp is also an advisor to Ripplewood, so there’s potentially heavyweight automotive advice on hand.

RHJ also has an automotive bias to its investment holdings. It has a 37 per cent share of Japanese casting company Asahi Tec, which also incorporates US metal-basher Metaldyne. Asahi Tec actually derives the bulk of its revenue from US car-makers (43 per cent).

Plus it owns Japanese widget maker U-shin, a supplier of automotive door locks, and Belgian aluminium and magnesium castings company HIT.

Not so automotive related are a Japanese holiday company Phoenix Resport, which used to own the world’s biggest swimming pool, and Columbia Music Entertainment. Columbia was a Ripplewood Investment, but transferred to RHJ.

What we don’t know exactly is what plans RHJ has for Vauxhall/Opel, although my guess is that it will go along with whatever GM, now rumoured to be eyeing a 45 per cent in its spun-off European business, wants.
Think of RHJ as temporary investors in Vauxhall/Opel. Ferrari did something similar a few years ago.

RHJ’s investment gives GM a handy capital boost and when times get better in a couple of years, GM invokes the buy-back clause. Then RHJ walks away with a handsome profit and GM gets its European businesses back. Nice deal.

It’s looking like the dark horse bidder for Opel could finish in front. Brussels-based RHJ International, which prefers to be known as a diversified holding company rather than a private equity company, has confirmed it’s in advanced negotiations with General Motors Corp. to acquire Opel. A spokesman for RHJ says an announcement “could be quite close.” The mere fact that RHJ went public with its interest, issuing a press release July 13, is a sign the publicly traded company is confident it will prevail.

If so, the Opel saga could have a surprise ending. Canadian-Austrian auto parts maker Magna International, working with Russia’s Sberbank, seemed to be the favored bidder until a few days ago. But RHJ offered improved terms. It’s seeking less financial support from the German government and promising to keep all of Opel’s factories open. China’s Beijing Automotive Industry Holding Co. also bid, but seems to have spooked some politicians with its obvious desire to acquire German technology.

German politicians will breathe a sigh of relief if Opel’s ownership is settled before national elections Sept. 27. But Opel workers will still have plenty to worry about. For all the auto industry dealmaking that has occurred in the last year, precious little actual consolidation has taken place. Opel was struggling even before the global recession hit, and it may well be several more years before demand for cars recovers to its pre-recession levels. Promises to maintain Opel factories may be politically necessary to close a deal, but will be hard to keep.

RHJ says it wants to rebuild Opel as a standalone European carmaker. Given the continued overcapacity in the European car market, and the superior economies of scale of competitors such as Volkswagen, that will be very difficult. The more realistic scenario is that RHJ undertakes some of the tough cost cutting at Opel that domestic automakers would have a difficult time doing for political reasons. Then, in a few years, the way will be clear for RHJ to re-sell Opel to one of the other major carmakers.
Fiat may still be Opel’s most logical owner. The Italian carmaker bid for Opel in the early stages, but wasn’t willing to make some of the same promises as the others. If Fiat can make a go of its takeover of Chrysler, in a few years CEO Sergio Marchionne might be in a position to take another look at Opel. His dream of creating a global carmaker to rival Volkswagen and Toyota could still come true.