Final Bids Submitted for Opel; Magna Makes Last-Minute Change to Shareholder Structure

General Motors (GM) has received final offers from the three bidders that are competing to secure a majority stake in its European Opel/Vauxhall unit, with leading contender Magna changing the shareholding structure of its bid at the last minute. The three companies that were initially involved in the process—Magna International, RHJ International, and Beijing Automotive Industry Corporation (BAIC)—have all submitted their best and final offers, although in its official statement GM refused to confirm who the final bids were from. In the statement, GM said, "General Motors confirms it has received final offers for a stake in Opel/Vauxhall from three bidders." GM will now examine the respective bids, before reviewing them with the trust currently administering Opel, the German government, and other European governments affected by the decision. The European Commission will also be involved once the decision on the winning bidder has been confirmed as the deal will be subject to approval from the European Union (EU) competition authorities. GM also needs clearance from its board and a U.S. Treasury-led auto industry task force for the deal to go ahead. Sources close to the bidding process told the Financial Times (FT) that the race is shaping up to be a contest between Magna and RHJ, with uncertainty over the BAIC bid meaning that it is currently the least favoured option.

The biggest alteration to the final bids that has been revealed publicly is a fundamental change to the proposed shareholder structure of the Magna offer. Magna International and its financial backer Sberbank had previously proposed that they would take a stake of 20% and 35%, respectively. However, in the final bid document these companies now propose a structure whereby they will take a 27.5% stake each. Daniel Witzani, a Magna Europe spokesperson, said that the overall investment plan has not been changed materially from that already publicly known. Under the new plan, GM would still retain a 35% stake in Opel while workers would still be offered a 10% stake in the business. According to the FT, the change has been made as the German authorities are happier with this proposed structure. Magna is looking to the Russian market as the major component of its business strategy for Opel, with the company planning to manufacture and market Opel passenger cars in Russia using production capacity provided by the GAZ Group. The Russian government is heavily backing the Magna and Sberbank bid, with Russian President Dmitri Medvedev having visited Germany last week. He sought assurances from the German government and managed to elicit public support for the Magna/Sberbank bid from German Chancellor Angela Merkel (see Germany: 17 July 2009: German Chancellor Backs Magna/Opel Deal After Talks with Russian President; Agreement Could Come "Early Next Week"). Russian newspaper Kommersant has reported that the Magna consortium would characterise its final offer "in the form of an ultimatum'' and quit negotiations should it be rejected.

Outlook and Implications

Although the final bids have now been submitted for Opel, there are still many agencies and stakeholders that need to be consulted and which need to agree to the chosen bidder. The sheer number of interested parties is something of an obstacle to completing a deal quickly. There are elements to all three bids that are unattractive to one or more of the stakeholders involved. The Magna bid is nominally the current favourite as a result of the Austrian/Canadian company having signed a memorandum of understanding (MoU) with GM at the end of May (see Germany: 1 June 2009: Magna Reaches Agreement with GM and German Government for Control of Opel). However, the fact that Magna wants control over Opel's vehicle technology is a major sticking point for GM, which does not want to relinquish full ownership rights over platform technology such as the Delta II and Epsilon II platforms, which form the basis of the next-generation Opel Astra and Opel Insignia, respectively. GM is standing firm on this issue, with that vehicle technology key to its future global model strategy. In an interview with the Canadian press, Tom Stephens, GM's vice-chairman of global product development, said that GM would have to retain access to the technology for any deal to work. Stephens said, "There is no scenario where I don't have full access to the intellectual property. None." The issue of intellectual property is arguably an even bigger problem for the BAIC bid as a result of Chinese automakers' history of sailing close to the wind in this respect, including GM's own issues with Chery over the CC A-segment car.