ANNOUNCEMENT 09 Sep 2009

In September 2009, the government of Germany announced changed rules for foreign investors.

NUMBER OF INTERVENTIONS

1

  • 0 harmful
  • 1 neutral
  • 0 liberalising

SOURCE



Driving Conversations. (6 August 2009). Opel Update. Available at http://drivingconversations.gmblogs.com/2009/08/opel-update.html

Driving Conversations. (28 July 2009). UPDATE: Clearing the Air. Available at http://drivingconversations.gmblogs.com/2009/07/clearing-the-air.html

Financial Times. (28 May 2009). Anger over German role in GM shake-out.

Financial Times. (4 July 2009). Mandelson signals loan move to help GM spin off European car plants.

Financial Times. (13 July 2009). RHJ vows to put Opel in profit by 2011.

Financial Times. (4 August 2009). GM resists pressure for hasty Magna deal.

Financial Times. (7 August 2009). RHJ to ease conditions on Opel offer.

Financial Times. (10 September 2009). GM opts for Magna in Opel deal.

Financial Times. (14 September 2009). Belgian leaders seek Kroes talks.

Financial Times. (16 September 2009). GM chief defends Opel sale decision.

Financial Times. (22 September 2009). Germany to escape brunt of Opel job cuts.

Financial Times. (29 September 2009). EU watchdog urges quick action on Opel.

Frankfurter Allgemeine Zeitung. (21 September 2009). Opel will in Europa 11.000 Stellen streichen.

General Motors. (30 September 2009). GM employees in Europe. Retrieved on 30 September 2009 at http://www.gm.com/europe/corporate/about/employees/

Handelsblatt. (29 July 2009). Koch wirft GM.

Handelsblatt. (3 August 2009). Opel-Poker: Politiker erh?hen Druck.

Sueddeutsche Zeitung. (3 August 2009). Appelle nach Detroit.

The Wall Street Journal. (23 July 2009). Differences emerge on buyer for Opel.

Wirtschaftswoche. (1 August 2009). Deutschland ist nicht erpressbar.


Inception date: No inception date

FDI: Entry and ownership rule

The process of selling GM's European arm Opel/Vauxhall appears to have been influenced by state-advanced considerations that could come at the expense of trading partners. Readers are cautioned, however, that as the offers of the remaining bidders (Magna International Inc./Sberbank and RHJ International) as well as a government-funded study (by the investment Bank Lazards Ltd.) on the viability of these bids remain unpublished, a definitive evaluation is not possible at this stage. The paragraphs below summarize the key aspects of the sale process including descriptions of the two bids and reported reactions of parties involved.

 
According to numerous, consistent press reports, Magna International Inc./Sberbank offered to take a 55 percent stake in Opel/Vauxhall for a cash payment of EUR350 million and a further EUR150 million in loans to the new company. The remaining stakes would be held by General Motors (35) as well as the work force of New Opel (10 percent). In order to proceed with the deal, the Canadian-Russian joint venture sought government loan guarantees of EUR4.5 billion. According to press reports, this bid plans to develop Opel/Vauxhall into an autonomous enterprise and to build a stronger presence in the Russian market, including a production-joint venture with Russian car-producer Gaz. In the restructuring process, Magna/Sberbank was initially reported to consider job cuts of less than 10,000 employees. The final figure of 10,500 potential job losses as well as their geographic dispersion was floated after a successful deal was anounces (see below).
 
The bid of Belgian investor RHJ International (RHJI) also proposed to create an autonomous Opel/Vauxhall, although ties with General Motors would have remained stronger. RHJI apparently offered EUR275 million for a 50.1 percent stake and required EUR3.6 billion in public loan guarantees. In its first offer, RHJI was reported to have planned job cuts of 10,000 to 12,000 employees including the closure of a plant in Bochum/Germany. Subsequently, RHJI has backed down from this plan and estimated job cuts of less than 10,000 employees to be sufficient and the factory Bochum to remain open. As the details of this bid remaind unpublished, it is unclear in which locations these cuts would have occured.
 
Reactions to the bidding process have been reported from the British government, German politicians and John Smith, Vice-President at GM Group and chief negotiator on the side of GM. In Germany, key figures of the regional as well as the national government openly back the Magna/Sberbank bid. Among other regional Prime Ministers, Roland Koch (of Hesse) most prominently opposes the bid of RHJ International. These politicians in whose states Opel currently runs production sites have been cited to pursue two defensive motives in the selling process of Opel:
(1) They do not want to give state guarantees without job and production site guarantees.
(2) They want to secure that funds do not flow out of EU-territory with the exception of a production site in St. Petersburg.
 
After sending mixed signals in the first weeks of the selling process, the German federal government adopted the pro-Magna/Serbank position and has also voiced the necessity of job guarantees to a successful bid. In addition, regional as well as national politicians have stated that the current promise of public loan guarantees of up to EUR4.5 billion applies only to the Magna/Sberbank bid.
 
The British government has agreed to give loan guarantees to the spun off company. However, business secretary Lord Mandelson has linked public guarantees to the future of two Vauxhall plants. "Continued Vauxhall production in the UK remains a very top priority for this government," he told the BBC's Radio 5 Live.
 
While General Motors has not voiced a preference for either bidder, Vice President John Smith has offered insights into the negotiation process on the company's official blog 'Driving Conversations'. Apparently, negotiations with Magna/Sberbank are more demanding in comparison with RHJ's for two reasons. First, the Canadian-Russian joint venture demands assets GM does not own in full but shares with other partners. Second, GM refuses to hand over intellectual property to Russia's car producers Gaz or Avtovaz without compensation. As Mr Smith notes, "'t'he bid from RHJI is completed and would represent a much simpler structure and would be easier to implement. It would require less monetary participation by the government and would keep our global alignments solid, while still creating an independent Opel/Vauxhall organization in Germany. This remains a reasonable and viable option to be considered as the very difficult issues around the Magna negotiations continue to be worked." While refraining from nominating a preferred negotiating partner, according to Mr Smith the Lazards study on the viability of the bids has left'a strong impression that the BHJI bid was superior'. In the interpretation of some German politicians, GM's apparent reluctance to close a deal with Magna/Sberbank stemed from the possibility of a easier future buyback of a restructured Opel/Vauxhall from RHJI.

 

On 9 September 2009, General Motors announced its decision to sell its European operations to Magna/Sberbank under the conditions specified above. According to a German government insider, "alternatives to Magna were either too expensive or damaging' for GM. While German politicians strongly welcomed GM's decision, Manfred Wennemer, the government's representative on the trust board of Opel, publicly voiced concern over the viability of the solution.

 

After the sale, reports on the new owners' restructuring plans described the international distribution of the 10,500 job cuts to be unproportional. According to the press, 1,373 British jobs will be cut, 2,090 in Spain, 2,584 in Belgium and 4,116 in Germany. If the reported figures are correct, British workers would bear 13 percent of total layoffs while constituting9 percent of GM Europe's work force. For Belgians, these figures are 25 and 5 percent, for Spain they are 20 and 13 percent and for Germany they are 39 and 46 percent respectively.

 

Belgian and British officials have voiced opposition to German claims on job and plant guarantees. European Competition Commissioner Neelie Kroes said she would investigate the allegations.

 

GM Europe currently has employees in Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey and the United Kingdom.

AFFECTED SECTORS

 
N/A

AFFECTED PRODUCTS

 
N/A