Saturday, October 17, 2009

(BN) GM Should Reconsider Opel Bids Amid Questions Over Germany's Aid, EU Says

Bloomberg News, sent from my iPhone.

GM Should Reconsider Earlier Bids for Opel, EU Says

Oct. 17 (Bloomberg) -- General Motors Co. should be allowed to reconsider all bids for its Adam Opel GmbH unit after German aid policies pushed the U.S. carmaker to choose Magna International Inc. as the buyer, the European Union said.

Germany's offer of 4.5 billion euros ($6.9 billion) in state loans and guarantees for Opel's sale must be available to all suitors to meet antitrust rules, the EU said yesterday in a statement outlining a letter that European Competition Commissioner Neelie Kroes sent to Economy Minister Karl Theodor zu Guttenberg. Authorities should inform GM and the trust that owns Opel that the aid is available to any buyer, the EU said.

Guttenberg said today that Germany will work to assuage EU concerns and that the sale is likely to proceed. Chancellor Angela Merkel's government chose Magna, Canada's biggest auto- parts maker, and Russian partner OAO Sberbank as Opel's preferred bidder in May, saying they wanted to preserve jobs. GM agreed in September to sell the unit to Magna, turning down a bid from Brussels-based investment company RHJ International SA.

"If there are misunderstandings that need to be cleared up, we will do that," Guttenberg told reporters in Berlin. "I'm confident this will happen in the coming days. Answers will be given, and they'll be the right answers."

A preliminary EU inquiry showed "significant indications" that Germany improperly favored Aurora, Ontario-based Magna over other suitors for Opel, Kroes said in her letter. "A precondition for the aid would be incompatible" with EU rules that seek to limit state involvement in industries, she said.

Karin Kirchner, a spokeswoman in Zurich for GM's European operations, declined to comment today.

Politicians' Favor

Opel, which has its headquarters in the Frankfurt suburb of Ruesselsheim, received an initial 1.5 billion euros in emergency loans from Germany as Detroit-based GM sought Chapter 11 bankruptcy protection in the U.S. in early June. A number of German politicians, including Roland Koch, prime minister of Opel's home state of Hesse and a member of Merkel's Christian Democratic Union party, said in May that they favored Magna.

A trust of executives and politicians from Germany and the U.S. now controls a 65 percent stake in Opel, with GM owning the other 35 percent. The trust chose Magna in September on GM's recommendation. RHJ had been the only other contender after GM negotiators and government aides agreed in July to stop looking at a bid from Beijing Automotive Industry Holding Co.

"GM and the Opel trust should be given the opportunity to reconsider the outcome of the bidding process on the basis of firm written assurances by the German authorities that the aid would be available, irrespective of the choice of investor or plan," Kroes said.

No Interest

RHJ, which agreed on Oct. 15 to buy Commerzbank AG's Kleinwort Benson private-bank unit in the U.K., isn't interested in reviving a bid for Opel, said Arnaud Denis, a spokesman.

"We are not considering it," Denis said. "This isn't in the cards."

Edda Graf, a spokeswoman based at Magna's European headquarters in Oberwaltersdorf, Austria, declined to comment when contacted by Bloomberg News today.

Other contenders for the Opel stake have found alternative automotive investments. Fiat SpA, Italy's biggest manufacturer, was already buying a stake in Auburn Hills, Michigan-based Chrysler LLC when it submitted a non-cash offer for Opel that included factories and other assets from its own car operations.

Fiat said repeatedly after Magna was named preferred bidder in May that it wouldn't improve on the proposal. Chief Executive Sergio Marchionne said in September that Fiat is "completely closed" to any further interest in Opel as his company develops strategy for ties to Chrysler. The Turin-based manufacturer declined to comment further today.

Saab Auto's Disposal

Beijing Automotive, China's fastest-growing automaker, is now a suitor for Saab Automobile AB, another European division that GM is selling. The company joined a group in September that's bidding for the unprofitable Trollhaettan, Sweden-based brand. Partners include sports-car manufacturer Koenigsegg Auto and entrepreneurs Augie Fabela II and Baard Eker.

Saab's sale depends in part on a 400 million-euro technology-development loan from the European Investment Bank, the EU's lending arm. The EIB's board will discuss Saab's application on Oct. 21.

Magna and Sberbank, Russia's biggest lender, are close to completing an agreement to buy a 55 percent stake in Opel, three people familiar with the situation said on Oct. 15. GM's holding in Opel would remain at 35 percent, while the unit's employees would receive a 10 percent stake.

GM, which emerged from bankruptcy in July, is concluding discussions on the Opel disposal's legal details with Magna and Sberbank, while the Canadian manufacturer is in talks with the division's unions across Europe on cutting labor costs.

Germany has said it doesn't need EU clearance for the loans it's providing, arguing that state help for rescuing companies during economic crises is exempted by the regulations.

"I have a lot of understanding for the EU Commission's approach," Guttenberg said today. Asked whether Opel's sale to Magna will unravel, he said, "I don't believe so." Guttenberg said he forwarded Kroes's letter to GM and Opel's trust.

Rainer Bruederle, deputy leader of Germany's Free Democratic Party and a contender to become economy minister in Merkel's new coalition, told reporters today that Opel's sale is likely to succeed in the face of the concerns voiced by the EU. He added that the FDP's criticisms about the bidding process "weren't wrong."

To contact the reporter on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net .

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