A Canadian auto parts supplier has come to the rescue of German carmaker Opel, negotiating a deal with the German government that will save the company from insolvency.
Officials from all sides announced the agreement after talks lasting into the early hours of Saturday.
German Foreign Minister Frank-Walter Steinmeier called it a "responsible solution" that would preserve the highest number of jobs.
Under the terms of the deal, supplier Magna will have a 20% stake in GM Europe, an arm of General Motors, which owns the Opel brand.
Russia’s Sberbank will own a 35% share, Opel employees will have 10%, and General Motors will retain a 35% stake, according to GM spokesman Joerg Schrott.
The German government will provide a bridge loan to keep GM Europe operating in the short term.
The Obama administration welcomed the deal as a "positive step" for the industry.
"The auto task force will continue its close engagement with the German government on the issue," a senior administration official said.
The official confirmed that President Obama had spoken by phone with German Chancellor Angela Merkel before the deal was reached, and added there was no financial commitment by the U.S. government under the Opel agreement.
The deal ensures that General Motors’ European assets — which also include the Vauxhall car brand in Britain — will be unaffected by GM’s expected bankruptcy filing.
Magna warned during negotiations that it would have to cut about 10,000 jobs. General Motors has around 55,000 employees in Europe.
About 2,000 of the job cuts would be in Germany, Magna has said, but a top company official tried to reassure the Germans that it would try to protect the company as much as possible.
"We will, and I want to stress that again, preserve all the German Opel locations," said Magna co-Chief Executive Siegfried Wolf. "We’re keen to have talks with all the states where Opel has factories in the next few weeks and are confident to be able to find solutions to preserve jobs, because every job that is lost is one too many cash advance lenders. We will work with Opel management to try to avoid those job losses."
Steinmeier told reporters that such risks can’t be avoided.
"But," he said. "I think we have found a responsible solution with private investors and interim funding from the state. It is a solution which preserves Opel’s location in Germany and also preserves the highest possible number of jobs."
German Finance Minister Peer Steinbrueck said early Saturday that the country has guaranteed transitional credit for Opel of $2.1 billion. In addition, a trust will be created where Opel’s stock will be parked prior to the division of shares.
Along with Sberbank, Russia’s biggest bank, Russian automaker GAZ Group will provide some financing, said Andrzej Kasperek, director of corporate business development with GAZ.
"I think the whole arrangement with Magna and the Russian partners made this a very attractive deal for GM," Kasperek said. "Opel is very well regarded as a brand. But we think we can increase sales in the next five years."
Financially strapped General Motors (GM, Fortune 500) is expected to announce as soon as Monday that it is filing for bankruptcy.
"Opel has received a perspective for the future," said Merkel. "That is a chance for the employees, who have earned it, as I find, because they are not to blame for the situation but instead big mismanagement in the United States of America at GM."
Merkel said the German government did "what it had to do" in rescuing Opel.
"I had an open exchange in a phone call with the American president, and we agreed that we do everything to bring this complex task to a good conclusion. And this clearly set the tone for the negotiations," Merkel said.
General Motors Corp filed for bankruptcy on Monday, forcing the 100-year-old automaker once seen as a symbol of American economic might and dynamism into a new and uncertain era of government ownership.
The bankruptcy filing is the third-largest in U.S. history and the largest ever in U.S. manufacturing.
The decision to push GM into a fast-track bankruptcy, and provide $30 billion of additional taxpayer funds to restructure the automaker, is a huge gamble for the Obama administration.
But in a sign of progress in the government’s high-stakes effort, a bankruptcy judge approved the sale of substantially all of U.S. automaker Chrysler’s assets to a group led by Italy’s Fiat SpA in an opinion filed late on Sunday.
Chrysler’s bankruptcy, also financed by the U.S. Treasury, has been widely seen as a test run for the much bigger and more complex reorganization of GM.
The GM plan is for a quick sale process that would allow a much smaller GM to emerge from court protection in as little as 60 to 90 days.
“Now the hard part begins, which is making GM and Chrysler competitive. If they don’t do that, then we’ll be doing this all over again in a few years,” said Christopher Richter, auto analyst at CLSA Asia-Pacific Markets in Tokyo.
“The immediate implication is that the companies are going to get smaller and so market share is up for grabs, which means that rivals like Toyota, Honda, Nissan and Hyundai are going to gain share no credit check payday loan.”
LIFELINE
Since the start of the year, GM has been kept alive with U.S. government funding as a White House-appointed task force vetted plans for a sweeping reorganization that will be undertaken with $50 billion in federal financing.
By taking a 60 percent stake in a reorganized GM, the Obama administration is gambling that the automaker can compete with the likes of Toyota after its debt is cut by half and its labor costs are slashed under a new contract with the United Auto Workers union.
The governments of Canada and the province of Ontario agreed to provide another $9.5 billion to GM in a late addition to the plans for the bankruptcy.
GM plans to close 11 U.S. facilities and idle another three plants. It has not provided an updated target for job cuts but had been looking to cut 21,000 factory jobs from the 54,000 UAW workers it now employs in the United States.
The UAW would have a 17.5 percent stake in the “new GM.” The Canadian government would own 12 percent and GM bondholders would get 10 percent.
RELUCTANT INVESTOR
Powered by WordPress -- XHTML 1.0