May 29, 2009 / 9:55 AM / 8 years ago

Magna nears deal for GM's Opel

<p>New Opel cars are pictured at the Opel plant in Bochum May 29, 2009. REUTERS/Ina Fassbender</p>

BERLIN/DETROIT (Reuters) - Canadian auto parts group Magna has reached a preliminary deal with General Motors Corp to invest in Opel, boosting hopes for a deal to save the German unit as its U.S. parent prepares to enter bankruptcy.

Sources close to the negotiations told Reuters on Friday that Magna and GM were working out the final details of an agreement before a meeting with Chancellor Angela Merkel and senior ministers set for the evening.

“We have an agreement in principle between GM and Magna,” one of the sources said.

As the clock ticked down to a Monday restructuring deadline for General Motors, widely expected to lead to a bankruptcy filing for the U.S. automaker, GM’s Saab unit -- whose future also hangs in the balance -- was granted more time to restructure by a Swedish court.

Back in Detroit, ground zero in the global car industry’s downturn, the United Auto Workers union overwhelmingly ratified a new cost-cutting labor agreement with GM, clearing a major hurdle in the automaker’s restructuring efforts.

Under the deal, the union would receive a 17.5 percent stake in a restructured company in return for retiree healthcare concessions.

The agreement comes as GM races to slash debt and labor costs ahead of a government-imposed deadline of June 1. The No. 1 U.S. automaker is widely expected to follow smaller rival Chrysler into bankruptcy protection with the financial backing of the U.S. Treasury.

GM said late on Friday that President and Chief Executive Fritz Henderson will hold a media briefing on Monday.

Chrysler LLC, meanwhile, neared approval for its sale to a group led by Italy’s Fiat SpA after three days of court testimony -- although opponents are likely to file immediate appeals.

Chrysler wants to sell most of its assets to a “New Chrysler” owned by Fiat, labor unions and the U.S. and Canadian governments, in exchange for $2 billion paid to its lenders.

Approval would be a victory for the White House, which had been criticized by many bankruptcy specialists for setting a seemingly unrealistic goal of bringing the automaker’s operations through Chapter 11 in less than 60 days.

Opponents of the sale who have filed the objections -- which include debtholders, suppliers and dealers that will be closed -- have been using testimony from executives of Chrysler to show that they could have avoided bankruptcy or offered more to creditors.

HOPE FOR OPEL

In Germany, efforts to forge a rescue for GM’s European unit continued despite tensions.

Magna appeared to have overcome earlier frustration with new demands from GM to secure a preliminary deal, sources said.

Fiat Chief Executive Sergio Marchionne, a rival bidder for Opel who earlier insisted his company would not take “extravagant risks” for Opel, said life would go on if Magna managed to buy Opel. Fiat would continue to seek a Saab deal, and Chrysler was its main focus, he said, adding that he was not interested in a partnership with Magna.

The bidders faced a deadline of 1200 GMT on Friday to submit preliminary contracts setting out plans for bridge financing and a temporary trustee scheme to protect Opel’s assets. A first round of talks earlier this week between the German and U.S. governments, the bidders and GM collapsed amid mutual recriminations.

MORE CANNOT BE ASKED

Fiat’s Marchionne spoke out on Friday morning in a move one analyst said was the first step in Fiat pulling out of the running.

Marchionne said he was still interested in Ruesselsheim-based Opel, which employs 25,000 staff in Germany, but ”more cannot be asked.

Marchionne said “the emergency nature of the situation cannot put Fiat in a position to take extravagant risks.” Marchionne said it was “unreasonable” to expect Fiat to provide funds to a group whose finances remain unknown.

The Agnelli family, which controls Fiat, “totally” supports Marchionne’s plans and would continue to do so even if a capital increase were needed to fund them, the chairman of the family holding company said on Friday.

Elsewhere, French carmaker Renault and its Japanese partner, Nissan Motor Co, pledged to squeeze out more cost savings from their partnership as the automotive industry worldwide battled a deep crisis.

In Sweden, loss-making Saab, which first sought protection from its creditors in February, was granted an extension until August 20 to line up a new owner and restructure its business.

Swedish business daily Dagens Industri reported late on Thursday that the two front-runners to buy Saab were Swedish luxury carmaker Koenigsegg and U.S. financier Ira Rennert and his Renco Group, with Italy’s Fiat in third place.

Saab and GM are due to name a preferred candidate among three remaining unnamed bidders in the coming weeks.

Reporting by Reuters bureaus across the world; Writing by Helen Massy-Beresford and James B. Kelleher; Editing by Marcel Michelson, David Cowell and Matthew Lewis

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