Fiat SpA, the Italian carmaker that’s seeking to take over General Motors Corp.’s Opel unit, may have an advantage over rival bidder Magna International Inc. by guaranteeing German jobs and the brand’s future.
A week after GM started due-diligence talks with suitors, Fiat yesterday submitted its plan to the German government, promising to keep the Opel division and at least three of the division’s four factories in the country. The proposal is “more detailed than anything we’ve seen from Magna so far,” said Felix Probst, a spokesman for Economy Minister Karl-Theodor zu Guttenberg, who yesterday called the plan “interesting.”
“Fiat definitely has the edge,” said Juergen Reinholz, the economy minister in the German state of Thuringia, who’s involved in the talks. About 1,900 of Opel’s 25,000 German employees work in a factory that assembles Corsa cars in Eisenach, one of the state’s largest cities. “They submitted their offer faster. Magna has some homework to do to erase that lead,” Reinholz said in a phone interview.
Detroit-based GM, surviving on U.S. loans, is reorganizing to avert a potential June 1 bankruptcy. Aurora, Ontario-based car-parts maker Magna is making a joint bid with OAO Sberbank and OAO GAZ, Reinholz said. Sberbank is Russia’s biggest lender, while GAZ is country’s second-biggest carmaker and is controlled by billionaire Oleg Deripaska.
Fiat Shares Rise
Fiat fell 6 cents, or 0.7 percent, to 8.07 euros in Milan trading. The stock has risen 76 percent this year, valuing the Turin-based company, Italy’s biggest manufacturer, at 9.7 billion euros ($13 billion).
Magna is seeking a stake in Opel of no more than 25 percent, a German government official said on April 28. Magna confirmed in a statement yesterday that it’s in talks with Germany’s government and GM, without mentioning any possible linkup with Russian investors. Deripaska held a stake in Magna until he sold it late last year to help pay off debts.
While GM, the largest U.S. automaker, hasn’t yet selected a frontrunner, a tie-up with Fiat may offer the best strategic solution in terms of sharing platforms, technology and management, a person familiar with the discussions has said.
Chrysler Agreement
Fiat reached an agreement on April 30 to acquire a stake in Auburn Hills, Michigan-based Chrysler LLC. A combination of Fiat, Chrysler and GM’s European operations would generate 80 billion euros in annual revenue, Fiat’s board said on May 3.
GM is looking at selling a stake in Opel, which sells models under the Vauxhall brand in the U.K., as part of a global reorganization to qualify for further U.S. government lending.
The U.S. company is cutting ties with its unprofitable Trollhaettan, Sweden-based Saab Automobile division and trying to find a buyer for the unit. Gunilla Gustavs, a spokeswoman at Saab, said today that Fiat isn’t among the 10 companies looking into buying brand.
Fiat Chief Executive Officer Sergio Marchionne wants to overtake Volkswagen AG as Europe’s biggest carmaker, according to Guttenberg, who oversees the Opel talks for Germany. Marchionne will be in New York, Detroit and Washington this week for further negotiations on the Chrysler partnership, a Fiat spokesman said today.
“Fiat is today the world’s most influential auto company,” with potential to control more than 10 percent of the global car market, analysts at Morgan Stanley, including Adam Jonas in London, said today in a research report. “At a time when governments are having the greatest bearing on private industry since World War II, Fiat may be able to gain from its new vantage point in the eye of the storm.”
Debt Pledge
Seeking to defuse German unions’ opposition, Marchionne promised he won’t transfer any of Fiat’s 6.6 billion euros in net debt to Ruesselsheim, Germany-based Opel, Guttenberg said. Opel employs about 55,000 people across Europe.
Klaus Franz, the chief of Opel’s works council, has softened his opposition since saying on April 28 that workers were “open to working with Magna, but not with Fiat.” Speaking at a press conference at Opel’s Eisenach factory yesterday, Franz said that all bids would be reviewed for risks to Opel and that workers “aren’t hostile” toward Fiat.
Employees have a say in any stake sale because GM’s rescue plan for the European unit calls for workers to make $1.2 billion in concessions.
According to Fiat’s plan, a fourth Opel assembly factory, in Kaiserslautern in the state of Rhineland-Palatinate, may be “negatively affected,” Guttenberg said yesterday after his meeting with Marchionne. He didn’t elaborate.
‘Unacceptable’ Idea
“We shouldn’t feel obliged to jump at the first available bidder,” Rhineland-Palatinate Economy Minister Hendrik Hering said in a phone interview. Keeping the other Opel plants at the expense of Kaiserslautern, where the company employs 3,400 workers making engines, would be “totally unacceptable.”
The new company, which may be called Fiat/Opel, would create synergies of 1 billion euros a year, the Financial Times reported yesterday, citing Marchionne.
“One shouldn’t jump to any conclusions until one knows what Fiat’s precise intentions are,” said Reinholz, the Thuringia economy minister. “Ultimately, GM isn’t preoccupied with striking a deal with German politicians. But it may well do so with Fiat.”
Sourced via bloomberg.com