Messier than ever
US’ General Motors decision to keep Opel has been met with mixed emotions, but mostly anger
By Andy Hum
SHORTLY AFTER GENERAL Motors (GM) announced it was cancelling plans to sell German auto-manufacturer, Opel, to the Canadian car parts firm, Magna International (also known as Magna Steyr), the company’s share prices went up. No, not GM’s – it was Magna’s.
There’s a clear message there: Magna’s investors would rather the company not have Opel. It seems odd, considering that GM’s president and CEO, Fritz Henderson, said that they are confident “that the European business can be successfully restructured,” and also that Germany had pledged Magna some 4.5 billion Euros (S$9.3 billion) in financial aid, with 1.5 billion Euros (S$3.1 billion) in bridge financing already provided.
So where’s the sense in that? For GM, it has said, “Given an improving business environment for GM over the past few months, and the importance of Opel/Vauxhall to GM’s global strategy, the GM Board of Directors has decided to retain Opel and will initiate a restructuring of its European operations in earnest.”
Essentially, it’s a positive sign for both companies in terms of outlook on profitability. Opel, and its 50,000-strong workforce, is clearly not an entity which the American auto-maker wants to unload – the announcement of the sale of Opel first came in March, when GM was under pressure by the US government to get their business in shape.
Now that GM has, for the first time in 21 months, had a year-on-year increase in sales, it’s probably decided that it can afford to keep Opel, after all. And they might be able to, if they’re smart enough.
The Germans are now calling for GM to repay the 1.5 billion Euros lent out by their government and there is speculation that GM might not be able to hold on to Opel at the end of the day. The reason is that when GM went into administration, ownership of Opel was transferred to a trust which comprised two representatives from the German government, two from GM and an independent panel member – it’s not clear yet whether the trust will have the final word on how the deal will continue instead of GM.
As for the German company’s current employee’s reactions, it’s been a mix of understanding and outrage – understandable if your parent company had filed for bankruptcy, not recorded any sales increase in nearly a year and now they’re pulling out of a deal of this scale
Who is Magna Steyr?
WHO MAKES THE Chrysler 300C, or the BMW X3, or Saab’s 9-3 Convertible? Hint: It’s not Chrysler, nor BMW nor Saab themselves. It’s Magna Steyr, a Canadian-based automotive firm that manufactures almost everything, from door modules to whole vehicles. Even Porsche and Aston Martin will soon have some of their models built by them.
For Magna, then, taking over Opel would mean that its largest clients, like BMW and Volkswagen, would have something serious to worry about. The two companies made it clear that they would have to re-evaluate their deals with Magna if the parts-maker did buy Opel.
For now, it looks like they have a little bit less to worry about, Magna included. After all, following GM’s announcement, shares have already gone up and now they won’t have to worry about its biggest customers wanting to amend any contracts.
