Building Opels in Canada

[Rionart]

Note to Mods: Now that the dust has settled over the purchase of Opel, I thought a new thread to track the progress of Magna's vision of building Opels in Canada would be appropriate...

'We want to build Opel cars in Canada' - The Globe and Mail

Greg Keenan, Eric Reguly, Bertrand Marotte

TORONTO, ROME and MONTREAL — From Saturday's Globe and Mail, Sunday, May. 31, 2009 09:11PM EDT

Canada will have a national auto maker now that Magna International Inc. has won the bidding to take over Adam Opel AG.

“We want to build Opel cars in Canada,” Magna chairman Frank Stronach said late Friday from Vienna as he awaited confirmation that the Canadian auto-parts giant had indeed won the backing of the German government for a deal that would give it and its partners a controlling stake.

“Canada should have its own Canadian company … a truly Canadian automobile industry,” he said, although he did not indicate where in Canada the cars would be built.

His comments came as the Magna-led bid for the key European operations of General Motors Corp. was being debated by German politicians, who later approved the deal and a bridge loan of 1.5-billion euros. Germany is home to several Opel assembly plants and about 25,000 of the company’s employees.

The victory for the 76-year-old native of Austria is the culmination of an automotive career that began in 1957, when Mr. Stronach founded a company in a Toronto garage whose first contract was with GM to stamp out metal brackets to hold sun visors in place.

Since then, with just one major setback in the early 1990s, Magna has become one of the three largest auto-parts makers in the world and, with a cash balance of $1.5-billion (U.S.), one of the healthiest companies in the auto industry.

Under the arrangement, Magna will hold 20 per cent of Opel, while its partner in the deal, Sberbank of Russia, will have 35 per cent. GM will retain 35 per cent and 10 per cent will be distributed to Opel’s employees.

Mr. Stronach said auto makers can be competitive if management and employees work together and end what he called the confrontational and adversarial structure that has dominated the industry.

“I know we can be competitive, I know we can create jobs in Canada and the United States. If we don’t change the culture, North America’s got no chance to be in the automobile industry, absolutely no chance.”

If Mr. Stronach is able to follow through with his plans for Canada, it will be the first substantial Canadian-owned vehicle manufacturer since the sons of Sam McLaughlin sold the carriage and auto-making business their father started to GM in 1918.

Magna is a vehicle manufacturer now, but does it on contract for GM, BMW AG and other auto makers in Austria.

While Mr. Stronach has a vision of building cars in Canada, he also has an eye east – on Russia, which he believes will recover from the economic crisis and again become one of the fastest-growing markets in the world.

He has been building relationships there for years, including advising Prime Minister Vladimir Putin on the industry.

Sberbank, which is controlled by the government, is Magna’s main partner in the Opel deal. Another potential partner is Oleg Deripaska, the oligarch who owns the Basic Element group and whose companies include struggling auto and truck maker OAO Gaz.

Two years ago, Mr. Deripaska invested $1.5-billion (U.S.) in Magna. Last autumn, during the height of the financial crisis, a margin call forced him to surrender that stake to lenders. Basic Element and Magna nonetheless vowed to work together to build a Russian auto-components business. Now that Magna has won control of Opel, Mr. Deripaska’s dream of selling quality cars to the masses could come true.

Sources said Basic Element might attempt to buy some or all of Sberbank’s stake in Opel. Basic Element is in no position to invest in Opel now because Mr. Deripaska’s heavily indebted empire is struggling to stay alive amid the financial crisis. Gaz is losing money and recently announced an “anti-crisis” restructuring effort.

Gaz has, however, offered to build Opel cars at its underutilized Russian factories. “The Gaz facilities would be put at the disposal of the new Opel company,” said an executive familiar with Mr. Deripaska’s plans. “Opel models are ideal for lower- and middle-class consumption in Russia.”

Gaz is Russia’s largest producer of buses, trucks and road-construction equipment and wants to ramp up its passenger-car business. It makes the low-tech Volga car, which was popular during the Soviet era, and recently struck a deal to produce a Chrysler knock-off called the Siber.

The question is whether the German government will tolerate production of Opels in Russia, when it is almost certain that thousands of Opel workers in Germany would lose their jobs. Exporting Opels to Russia, instead of building them there, would keep more of Germany’s Opel workers employed.

In winning his bid, Mr. Stronach defeated Italian auto-maker Fiat SpA and its chief executive officer Sergio Marchionne.

The complex negotiations to save Opel took on “the air of a Brazilian soap opera, in the midst of an election year both in Europe and Germany,” Mr. Marchionne said in Montreal yesterday.

He forecast a global automotive consolidation during the next two years that will leave just six players standing.

“This industry is in dire need of consolidation,” he said.

Mr. Marchionne bid for Opel in an attempt to vault into the global leadership ranks from its status as a regional player in Europe and South America. But losing out on the deal didn’t seem to bother him.

“If the Opel transaction is not available to Fiat, life will move on, you know.”

[OpelGT-de]

do not count the chickens before they hatch




Till today Magna and Opel signed ONLY a "letter of intent".
From my point of view this is worth nothing.

Only to put oil on troubled waters and to justify (public) the surety of the german government.

I have a bad feeling, that Magna will pull out in the near future

[Gary]

Here comes China: UPDATE 2-China moves on Opel with BAIC bid | Deals | Regulatory News | Reuters

[hrcollinsjr]

Here comes China: UPDATE 2-China moves on Opel with BAIC bid | Deals | Regulatory News | Reuters

I have no use for a country that will allow as many unscrupulous things to go on as they do, from sweat shops, not making sure of the safety of their workforce to making cheap illegal copies of quality products. God forbid what Opel would be like with Chinese control. Sorry about getting on my soapbox and if it's too inflammatory or political, feel free to delete it, but I said it just he same.

Harold

[P.J. Romano]

General Motors has received three final bids for its struggling Opel business, which includes Vauxhall in the UK.

Canadian car parts maker Magna, Belgian-based investor RHJ International and China's Beijing Automotive Industries are the bidders.

Magna, backed by Russia's Sberbank, has made a last-minute change to its bid in order to placate concerns about its Russian partner's influence.

It remains the favourite to buy a majority stake in Opel.

Read more here: BBC NEWS | Business | GM receives three bids for Opel

[Lindsay]

GM Balks at Selling Opel Unit - WSJ.com
Germany Presses GM on Sale of European Units - WSJ.com

Links have shorten the articles, but shows that something is brewing!

[wklopf]

I read somewhere that Magna was insisting that GM include their profitable Chevrolet operation in Europe, while GM was resisting. You can check out Chevrolet Europe at Chevrolet : official website for Europe. When I was in Budapest two years ago, one of the taxis we used was a Chevrolet, but unlike any Chevy I had ever seen. Of the seven models listed in the Chevy Europe sites for the various countries, only the Aveo sounds familiar to me. I think that I heard that they were based on Daewoo models. Bill

[basic instinct]

the new GT dosent do anything for me.

[2 Fast 4 U]

......I think that I heard that they were based on Daewoo models.....

That's right al the small Chevy's, in Europe, are really Korean made Daewoo's

[GoinManta]

Now that GM is out of bankruptcy.. and Opel wasnt touched during those preceedings (which is what I think this whole thing was about)...

I think GM is playing a switcheroo and not going to sell Opel. It made no sense that they would.. what made sense was selling it to buffer it from the North American operations bankruptcy filings.. Now that is over, and they had a "Deal" to sell Opel (so it wasn't affected by the bankruptcy), they have no reason to sell it.

Why would they.. if Chrysler was shot gun married to Fiat for thier "Small car technology" why the heck would GM want to get rid of thier "small car technology" i.e. Opels engineering dept.. ? Not only that their foothold in Eastern Europe and Russia..

You combine that with Penske taking over Saturn (which was already only selling rebadged Opels).. you have Saturn continuing to do what they have been doing.. (Selling rebadged Opels ) it all works for GM.. and now makes more sense than it did a few months ago.

Charles

[tekenaar]

DETROIT (AP) — Behind GM's hesitation to sell its unprofitable car business in Europe lies a Cold War fear: American technology will fall into Russian hands.

It's among the main reasons why General Motors Co. has balked at finishing a deal to sell its Opel unit to a group led by Canadian auto parts maker Magna International Inc. and Russia's state-owned Sberbank.

GM announced the tentative deal with Magna in May at a time when it was desperately trying to avoid bankruptcy protection.

But now, after exiting Chapter 11 in better financial shape and encouraged by signs of better sales, the Detroit-based automaker is second-guessing the deal, worried that future auto designs could wind up with Russian rival GAZ, which competes with GM's Chevrolet, the No. 2 brand in a growing Russian market.

GM is pushing a competing bid from Brussels-based investor RHJ International SA and may even keep Opel if its worries can't be resolved. It's playing hard ball, even though the German government, eager to preserve many of Russelsheim-based Opel's 25,000 German jobs in an election year, has offered 4.5 billion euros ($6.5 billion) in credit for the Magna-Sberbank deal.

In the murky world of Russian capitalism, both Sberbank and GAZ, maker of the Volga sedan, have strong ties to the Russian government, which has made no secret of its desire to help its ailing and outdated auto industry.

"It makes sense that GM is looking to the other alternative," said Jan Svejnar, a professor of international business and public policy at the University of Michigan. "In Russia these days large companies that have a significant state stake are obviously linked."

Russian Prime Minister Vladimir Putin repeatedly has said that the government supports Magna and Sberbank's bid and hopes that the deal would help the Russian car industry.

While GAZ is years behind GM and other Western automakers in vehicle technology, GM fears that down the road, GAZ could catch up by getting GM car architecture for Opel's small and midsize vehicles and other property at no cost, using it to compete with GM in its second-largest European market.

Under the German financing deal, Opel would stop paying technology royalties to GM if Opel defaulted on its private loans, yet GM would still be required to provide new technology to Opel, said a person briefed on negotiations between GM and the German government. The person didn't want to be identified because the talks are private.

GM and Magna worked out a deal to protect GM's current technology, but the GM board fears future technology could be lost if Opel goes into default, the person said.

GAZ, a maker of popular trucks, buses and minivans, has had trouble selling cars like the outdated Volga sedan. It is owned by Russian aluminum magnate Oleg Deripaska, who has strong ties to Putin. GAZ once owned a stake in Magna and recently hired GM's top purchasing executive to head its board of directors.

Also, the German government increasingly relies on Russia for oil and natural gas, so it wants to stay on Russia's good side, Svejnar noted.

The U.S. government, which now owns 60.8 percent of GM and has given it $50 billion in aid, would not comment on the prospect of technology going to the Russians.

Some analysts believe Russia may create a national holding company by bundling its ailing domestic car manufacturers in an effort to drive efficiency and set out a strategy for the sector. Yet others say GM's fears are overblown because GAZ has such a long way to go to really be competitive with Western automakers.

GAZ remains in business only because its cars are cheaper than those of other manufacturers due to Russian government subsidies and import tariffs, said Serguei Netessine, associate professor of operations and information management at the University of Pennsylvania's Wharton School.

"GAZ is in the business of producing very cheap cars from very, very old technology," he said.

GAZ, known in Russia for quality and corrosion problems, has tried to modernize through joint ventures or buying used technology from Western automakers. In 2006, it bought factory equipment from Chrysler that made old versions of the Sebring and Dodge Stratus sedans and used it to make the Volga Siber.

Netessine said that even if GAZ received Opel technology today, it would take years for it to begin producing vehicles because its manufacturing operations are so inefficient.

Also, GAZ, Sberbank and the Russian government don't have the capital to invest in new factories, nor do they have the political will to eliminate thousands of jobs by updating production from 1970s technology.

"Even if GM completely stops doing any research and doing any product development, maybe they're going to catch up with them in five or 10 years at the earliest," he said. "I think those fears of GM are sort of a little overestimated."
___

Associated Press Writers Nataliya Vasilyeva in Moscow, Matt Moore in Frankfurt, Germany, and Ken Thomas in Washington contributed to this report.

_____________

. . . bottom line for GM-Opel - "Ounce of prevention equals a pound of cure!" . . . mark my words!

. . . Russia/China have long, particularly negative history with observing and complying with other countries' "intellectual property/patent" rights!

[traytodd]

Germany says talks with GM on Opel far from over | Special Coverage | Reuters

GM is still holding things up.

[Rionart]

I should imagine Frank is fit to be tied right now:

DETROIT/FRANKFURT (Reuters) - The board of General Motors Co has opted to keep Opel, undoing months of painstaking negotiations to sell the European unit to a Russian-backed group led by Canada's Magna .


GM confirmed the decision made by its 13-member board after a meeting of directors on Tuesday in Detroit, saying that improving business conditions and the strategic importance of Opel to its operations had prompted the move.


The decision represented a setback for Magna, raised the risk of conflict with Opel's European unions and left open the question of how GM would finance a plan to go it alone on Opel four months after the U.S. automaker emerged from a bankruptcy financed by the Obama administration.


The decision by the GM board also marked a sharp break in direction from the course for Opel endorsed by GM Chief Executive Fritz Henderson who had said a sale of the European unit was the most likely outcome two weeks ago.


GM said it expected that restructuring Opel on its own would cost about 3 billion euros ($4.41 billion).


"GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable consideration," Henderson said in a statement.


The meeting of the GM board came after European Union officials challenged the terms of the funding Germany had pledged to support the sale of Opel to Magna.


Germany had promised 4.5 billion euros ($6.58 billion) in aid to help close the Magna deal, which was widely seen as the option for Opel most likely to preserve jobs.


But EU officials said GM needed to confirm that it would have agreed to sell Opel if Germany had made clear that the same funding would have been available to any buyer.


GM's board had opted to sell a 55 percent stake in the loss-making Opel unit to Canadian group Magna and its partner Sberbank .


The Opel saga has been running for almost a year. GM first asked Germany for loan guarantees in November 2008. The automaker had been seeking a buyer for the unit, which includes the Opel and Vauxhall brands, since March.


Auto analysts said keeping Opel would allow GM to maintain control of vehicle development and share parts across a few global platforms, much as Ford Motor Co has done in its turnaround.


"If they are going to be competitive on a global scale, they really don't have much choice but to keep Opel," said Autoconomy analyst Erich Merkle.


GM's move is a setback for Magna founder and chairman Frank Stronach, who left his native Austria at age 21 as an impoverished toolmaker but went on to build one of the world's biggest car parts groups.


Magna had no comment on the GM decision.


The German state of Hesse's premier, Roland Koch, said he was angered by GM's decision not to sell Opel to Magna, and that he wanted GM to pay back its bridge loan by November 30.


Opel's workforce -- which was to be cut by a fifth under the new owners from 50,000 -- was supposed to receive a 10 percent stake in the new company in return for 265 million euros in annual cost concessions.

GM would have kept a 35 percent stake in the unit under the now-scrapped deal.

(Reporting by Kevin Krolicki and Philipp Halstrick, additional reporting by Gernot Heller in Berlin; John Crawley, Jui Chakravorty, Soyoung Kim, David Bailey in Detroit and Ben Klayman in Chicago, editing by Matthew Lewis)


GM opts to keep Opel, scraps sale to Magna - Yahoo! Canada News

[wklopf]

In September I talked briefly with Rolf, a member of this forum who works for Opel at the headquarters in Russelsheim, and at that time he said that there would most likely be no sale. It appears that he was right. Also In September, I spent a few days in Russia, and St Petersburg was awash in cars, mostly the European and Asian makes which you normally think of, including Opel, of course. Near the airport there is a large car-dealers-row, much like you find in certain parts of many American cities. What I didn't see as many of as I had expected were Russian cars. There were some old-looking Ladas and a few newer-looking ones. There were a number of Volgas, most of which seemed to be serving as taxis. There were a few Gaz sedans as well. (Notice how I avoided trying to form a plural for "Gaz"!) Had the Magna deal gone through the man who controls Gaz would have had a major piece of Opel. Gaz builds heavy trucks as well as the cars. The Volga and Gaz cars looked like they would fit nicely in a line-up of American or European cars from the 1970s. I would guessthat Russian cars made up no more than 10 to 15% of the total vehicles I saw. I also saw a few Chinese vehicles, including one Geeley car and a large bus with the brand name "Golden Dragon". Bill

[Gary Sullivan]

I'm delighted GM isn't selling Opel. I thought the sale was a nightmare from the start as GM depends on Opel (and vice versa) for so much of its product development. I think this move is a no brainer, despite the months of work they put into making the Magna deal go. The only thing that could make me happier is the announcement they'll be selling Opels here in the states again soon.

[ghcoe]

I'm delighted GM isn't selling Opel. I thought the sale was a nightmare from the start as GM depends on Opel (and vice versa) for so much of its product development. I think this move is a no brainer, despite the months of work they put into making the Magna deal go. The only thing that could make me happier is the announcement they'll be selling Opels here in the states again soon.

They are, Saturns. I wonder if that means Saturn is going to stay now too.

[baz]

They are, Saturns. I wonder if that means Saturn is going to stay now too.

if your lucky they may close down production of Saturn's in the states and import the whole lot from opel with just a badge change

[P.J. Romano]

General Motors' (GM) decision to hang on to its European car unit Opel, including Vauxhall, was welcomed in the UK but met with anger in Germany.

Unite union chief Tony Woodley, a former Vauxhall worker, hailed the news as a "fantastic decision".

But unions in Germany said workers would begin walk-outs from Thursday in protest at GM's decision.

The German government, which had backed the sale of Opel, demanded GM repayment of a 1.5bn euro ($2.2bn; £1.3bn) loan.

"General Motors' behaviour shows the ugly face of turbo-capitalism," said Juergen Ruettgers, premier of the state of North Rhine-Westphalia, where there are fears that the Opel plant in Bochum could face closure.

'Totally unacceptable'

The German government has also responded angrily.

"We will get back taxpayers' money," German Economy Minister Rainer Bruederle said.

Mr Bruederle is attending a government meeting on Wednesday to discuss GM's decision and press it to reveal its new plans as soon as possible.

"The behaviour of General Motors towards Germany is totally unacceptable," he said.

"General Motors alone is responsible for this development. Only yesterday the workers signalled that they were prepared to consider wage sacrifice as a solution. It's up to General Motors to go back to the workers."

The German government had provided the 1.5bn-euro bridging loan to Opel to keep it afloat during the long, drawn out negotiations over the past few months to find a buyer.

GM first said in March that it wanted to offload Opel, which includes Vauxhall, when the US firm entered a period of bankruptcy protection that eventually saw it emerge with the US government as its biggest shareholder.

After months of negotiations, GM finally agreed to sell the brands to Canadian car parts maker Magna in September, with the German government pledging Magna 3bn euros in loan guarantees on top of the existing bridging loan.

German leaders and labour unions had favoured the deal as the best way to save German jobs as it included a guarantee that no German factory would be closed.

German strike action
Industrial union IG Metall said workers at Opel's four German plants would halt work - so-called "warning strikes" - on Thursday. Other plants in Europe would follow on Friday, it said.

Opel employs a total of 54,000 workers across Europe, with 25,000 based in Germany.

In the UK, its Vauxhall brand employs 5,500 people across two plants in Luton and Ellesmere Port.

The decision to sell Opel to Magna had been controversial because of the German government's offer of the 4.5bn euros in loans.

The European Commission warned last month that Berlin's offer of this aid may breach European competition rules, although the German government immediately denied any wrongdoing.

But on Tuesday the US giant said it had now decided not to sell the business because of "an improving business environment for GM over the past few months", and would now be seeking aid for Opel from all the European states where it has operations, including Germany.

The BBC's Berlin correspondent Steve Rosenberg said the decision was a "huge embarrassment" for Germany's recently re-elected Chancellor Angela Merkel.

"Her government had lobbied hard in support of the Canadian car parts supplier. The governor of the state of Hesse, where Opel has its headquarters, also said he was 'shocked and angry'."

Russian Prime Minister Vladmir Putin also waded into the row, saying he was "surprised" by the decision.

State-owned Sberbank, the country's largest lender, was to have backed the Magna takeover.

"According to our information the Magna-Sberbank consortium is intending to carry out discussions with General Motors very soon and carry out a deep legal analysis of the situation," Mr Putin's spokesman added.

'We know them'
However, some workers arriving this morning at Ellesmere Port, where they make the Astra model, were less than enthusiastic about the latest twist in the saga over GM's European operations.

"Hopefully it's good news but there are no guarantees," one employee told the BBC. "Whoever was going to own us, there's still going to be cutbacks."

Business Secretary Lord Mandelson he was keen for "very early discussions" with GM over how their plans affect its British workers.

"I have always said that if the right long-term sustainable solution is identified, then the government would be willing to support this," Lord Mandelson said.

Mr Woodley told the BBC that GM's news was an "incredible turnaround".

"The decision is in my view a fantastic decision and the right decision for General Motors themselves," he said.

"There's no logic in breaking up the company. I believe it is the right decision in spite of a good deal that we'd struck with Magna."

Unite, the main union at Vauxhall, last month reached a deal with Magna to limit job cuts at the two factories to just 600 people, and all through voluntary redundancy.

John Featherstone, Unite's convenor at Ellesmere Port, said he believed there would still be some restructuring in the UK, "but I am pleased we will be dealing with GM because we know them and we understand their culture - and they know us".

BBC NEWS | Business | German fury over GM Opel U-turn

[djenkins63]

After reading all of the above comments, I have to remember what a good friend told me years ago. "Real Opels are only made in Germany!" I hope GM keeps them for the Germans and we can go back to the way it was! Change is not always GOOD!!!

[ghcoe]

Change is not always GOOD!!!

Amen!