Germany prefers Magna for Opel, decision next week

By AFP

July 15, 2010 Updated May 22, 2009 at 4:01 PM CDT

Germany will decide next week which of three bidders is its preferred choice to take over GM unit Opel, but Canadian auto parts maker Magna International is in pole position, officials said on Friday.

Rival bidder Fiat of Italy sounded a downbeat note, saying the deal was "complicated" because of upcoming German elections, while Italian Foreign Minister Franco Frattini pressed Germany to evaluate all the options.

Magna is bidding together with Russian tycoon Oleg Deripaska's truck company GAZ. Russia's biggest lender, state-run Sberbank, on Friday confirmed it too was backing Magna's bid and was in talks with the German government.

"We will have to make a definite decision by next week," Economy Minister Karl-Theodor zu Guttenberg told reporters following a crunch meeting on the fate of the carmaker with top officials including Chancellor Angela Merkel.

Brussels-based investment group RHJ International has also made an offer for the struggling General Motors unit, which employs 25,000 people directly.

But several participants at the meeting in Berlin, including two local state leaders, made clear that their preference was for the Magna-led bid.

Italy's Frattini responded by emphasising that the German government had not yet made its choice, telling ANSA news agency: "The rumours that have spread over preferences or non-preferences are just preliminary skirmishes."

The governor of the German Rhineland-Palatinate state, Kurt Beck, said: "We are continuing negotiations but with the main focus on Magna."

There was a "consensus" between the federal government and the states, Beck told reporters after taking part in the meeting.

Roland Koch, premier of the state of Hesse, where Opel's headquarters are situated, said after the meeting: "If we cannot get an agreement with Magna, then the two other bidders remain in the game."

Zu Guttenberg, however, insisted that a final decision had not yet been taken and that there was "a host of open questions" and "significant risk" attached to Magna's bid.

Juergen Ruettgers of the state of North Rhine-Westphalia, rejected Magna's plan, saying it was "unacceptable" and "unfair."

The final decision on Opel, as well as other units of GM's European operations, including Britain's Vauxhall and Sweden's Saab, lies with GM itself and the US government.

But Berlin has a major say as it has promised to sweeten any deal with loan guarantees.

Fiat boss Sergio Marchionne said Fiat's bid was "far more rational" than the others but sounded a cautious note about the outcome.

"It's hard to say how it will finish with Opel. It's a complicated business because this is an election year in Germany," he told ANSA.

According to press reports, Magna and RHJ were expected to ask for five billion euros (seven billion dollars) in guarantees while Fiat was reported to be requesting seven billion euros.

The Canadian-Russian bid is also the one preferred by GM, according to press reports.

The fight to save Opel has become a race against time before the parent company likely declares bankruptcy and is also a political hot-button issue barely four months before Germans head to the polls in a general election.

Government spokesman Thomas Steg said earlier Friday the government would look most favourably on the bid which would secure the most jobs and the most factories in Germany.

According to a report to appear in Saturday's edition of the local paper the Rheinische Post, Magna would seek to cut 2,500 Opel jobs across Germany and around 10,000 Europe-wide.

Fiat says it will cut fewer than 10,000 jobs Europe-wide if it wins the bid.

Based in Aurora, Ontario, north of Toronto, Magna touts itself as the most diversified car parts manufacturer in the world. It employs 70,000 people in 326 plants and research offices in 25 countries.

However, it has not been immune to the general meltdown in the auto sector and lost 200 million dollars in the first quarter of 2009, bringing its losses since July 2008 to 563 million dollars.

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