August 6, 2009 / 1:01 PM / 8 years ago

GM dashes hopes for quick Opel deal with Magna

FRANKFURT (Reuters) - General Motors on Thursday dashed hopes of members of the German government that a deal to sell its European operations to Canadian group Magna could be reached by the end of this week.

<p>The Reichstag building, seat of the German lower house of Parliament Bundestag, is reflected in an Opel car emblem in Berlin, August 4, 2009. REUTERS/Tobias Schwarz</p>

GM Group vice president and chief negotiator John Smith said the U.S. carmaker still had considerable problems with Magna’s offer, remarks that seemed aimed at defusing mounting pressure from Berlin for GM to drop its resistance fast.

“Little progress was made in whittling down the outstanding issues, in part reflecting the return of some issues that we previously considered to be resolved,” Smith wrote in a blog entry on the company website Driving Conversations.

Ahead of a general election next month, German politicians have been prodding GM to end a stalemate and sign a deal with Magna.

“I can report some progress (with Magna), resolving perhaps one-third of the issues during a first day of talks. However, the difficulties of getting to ‘yes’ with three parties in the room were very much in evidence yesterday,” Smith wrote.

He reaffirmed that a simpler offer by rival Opel suitor RHJ had been all but wrapped up, and said the Belgian financial investor, led by ex-banker Leonhard Fischer, had presented an industrial concept as convincing as Magna’s while at the same time requiring less taxpayer support.

One source close to the talks confirmed a report by the Frankfurter Allgemeine Zeitung paper that the heads of Magna and GM would meet in Detroit on Friday to try to break the deadlock.

Germany has already loaned Opel 1.5 billion euros ($2.16 billion) to stay afloat after GM signed a non-binding agreement to sell Opel to Magna in May. The U.S. carmaker needs Berlin to fund a costly restructuring program at Opel over the next two years while the European carmaker continues to burn cash.

The government insists that the decision rests with GM, but has signaled further state aid could hinge on whether GM insists on a sale to RHJ.


Sources say that GM feels that Magna has taken advantage of unwavering support from German unions and local politicians, force-feeding Detroit a deal that it simply could not swallow.

Neither Magna nor RHJ will comment on the talks, but Smith has carefully documented developments in the negotiations in hopes of fostering understanding in Berlin for GM’s views and preparing the political ground for a possible deal with RHJ.

“We started the week with about 30 issues to resolve ... I can report some progress, resolving perhaps one-third of the issues during a first day of talks,” he stated.

Smith explained on Thursday that most of his time in talks with Magna was still devoted to resolving deviations from a memorandum of understanding signed in May between GM and Magna, of which some were “very fundamental in nature.”

Sticking points included Opel’s involvement with GM’s Chevrolet brand in Russia, intellectual property transfer rights in Russia, access to advanced technology, product development responsibilities, and minority shareholder rights.

He also disagreed with comments from Magna supporters that its proposal offered a substantially better future for Opel or one with greater freedom from ex-parent GM.

“There is really very little difference between the two proposals’ product, manufacturing and purchasing plans, the three big value-adding levers in the automobile business,” he wrote.

Berlin rejected RHJ’s first bid for Opel in May, and the private equity firm has been unable to undermine widespread backing in Germany for Magna, even after RHJ relinquished initial plans to close two Opel plants in Germany.

To read the blog, double click on


Reporting by Christiaan Hetzner; Editing by Rupert Winchester

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