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GM considering keepng Opel; negotiators meet

(Agencies)
Updated: 2009-08-25 23:13

BERLIN/FRANKFURT: German government officials met with General Motors' top negotiator on Tuesday, hoping to get answers on why the US carmaker has so far failed to choose a buyer for its European unit, Opel.

GM's board was expected to pick either Canadian automotive group Magna or Belgium-based RHJ at a meeting on Friday, but the US carmaker's directors declined to endorse a sale to either of the two bidders.

"The goal is to find out the reasons why the GM board was unable to take a decision," said one German official, who requested anonymity.

Related readings:  GM seals deal on Saab unit sell-off  GM to review bids for Opel brand  Beijing Auto fails in bid for GM's Opel  GM says Opel talks to continue with RHJ, Magna  GM says Chinese company bidding for Opel

The failure disappointed both politicians and labour in Germany, with unions threatening "spectacular measures" to force a decision, while the German government warned against a confrontation with GM.

Talks to sell Opel have gone on for months and are a political hot potato ahead of German elections in September, because of the state support required for the eventual buyer and the thousands of job cuts expected to follow any sale.

Chancellor Angela Merkel and the German states that host Opel plants have been putting pressure on GM to accept Magna's offer, made together with Russian partner Sberbank, because they think Magna would save more jobs.

But GM's top negotiator for the Opel deal, John Smith, has repeatedly cited the positive aspects of RHJ's offer, which he says would be easier to implement than Magna's plan.

KEEPING OPEL

Sources with knowledge of the deliberations told Reuters on Monday that GM was considering dropping plans to sell Opel altogether and instead raising US$4 billion to keep the unit. The news flummoxed German politicians and labour.

Because GM is barred from using funding from the US government to support its international operations, one of the options could include raising money by selling or mortgaging the automaker's assets in China, one source said.

"By not selling Opel/Vauxhall, GM has essentially two options -- providing 3 billion euros (US$4.3 billion) to continue operations (less than the US$4.5 billion promised by the German government) or liquidation," said credit analysts at UniCredit.

German deputy chancellor Frank-Walter Steinmeier, a social democrat who will face Merkel in the federal elections, said on Tuesday he expected GM to stick with plans to sell Opel to an investor.

Berlin and the German states have made clear they want Magna to get Opel and are set to hand out 4.5 billion euros in state aid to make it happen.

Germany has already provided 1.5 billion euros in bridge financing. Hence, German trustees overseeing a majority stake in Opel have to approve any deal after it clears the GM board.