Magna International Clearing Final Hurdles in Purchase of General Motors' Opel Division

The recent shake-up of the global automotive industry has created some bewildering new alliances as brands change hands like white elephant gifts at an office Christmas party. One such deal involves Magna International, Incorporated, a Canadian auto parts supplier which has partnered with Sberbank of Russia to purchase a 55% stake in Opel which is currently owned by General Motors Company.

The deal is expected to be finalized in a matter of weeks.

Magna has announced that it intends to cut approximately 10,500 Opel workers, primarily in Germany, as a means of cutting costs. Magna co-CEO, Siegfried Wolf, says the company is committed to returning Opel to profitability and repaying 4.5 billion euros (approximately $6.55 billion U.S.) that it has received from the German government to facilitate the deal. Wolf says, “By 2015 we want to pay back the government-guaranteed loans. Opel will be profitable before that, however.”

Opel currently employs approximately 25,000 workers (half of its total workforce) in Germany.

In addition to eliminating 4,000 Opel jobs in Germany, Wolf speculates that one of the automaker’s plants located in Antwerp may also be closed, resulting in additional job losses.

Wolf anticipates the need to invest nearly 1 billion euros annually in the company. Of that, approximately 170 million euros will go toward completion of a planned investment in Russia. Wolf said, “The 170 million would be used immediately, with the rest of the sum being generated from the internal cash flow that will be generated in Russia.”

Wolf also dismissed the rumors that some of Magna’s current cart parts customers, including Volkswagen AG, may terminate their contracts now that Magna will be competing with them in its new role as a rival automaker in the European market.

Belgium and Britain have urged the European Commission to ensure that German workers would not receive special treatment in a quid pro quo for the 4.5 billion euros in assistance promised by the German government. Both are also wary of the agreement between Magna and its Russian partner. The deal between the two would ensure that all four of Opel’s German manufacturing facilities will remain in operation while one of its factories in Britain could be shut down.

British Business Secretary Peter Mandelson said, “It is important to say that the (European) Commission should not accept anything that looks like a political fix or any linkage between aid and retention of jobs in any specific plant or country.”

European Union Industry Commissioner, Guenter Verheugen, has reportedly stated that commercial and economic factors, not political considerations, are the driving force in determining which factories will be closed and which ones will survive.

Premier of the Belgian region of Flanders Kris Peeters said, “We are convinced Antwerp has a fair chance. Antwerp has a better chance than certain German plants.”

The European Commission expects to receive details of Germany’s proposed aid package within the next couple of weeks. The body has asserted that no subsidies may be given prior unless it is satisfied that the circumstances meet all state aid and internal market rules.

German Chancellor Angela Merkel’s administration openly supported Magna over rival bidder RHJ. In May, it provided Opel with a 1.5 billion euro bridge loan to ensure that it did not become embroiled in General Motors’ bankruptcy restructuring this past summer.

Germany’s federal and state governments have indicated that they will provide additional aid in the billions of euros once the Magna deal is finalized this fall. At that point, Britain, Belgium, Spain and other EU members are expected to be called on to share the financial burden. Flanders has already offered to contribute up to 500 million euros.

Posted in In the News

Search for a vehicle

About Us  |    Contact Us  |    Terms of Use  |    Privacy Policy  |    Auto Dealer Marketing  |    Site Map

©2018,, LLC All rights reserved.