Magna International A 'Viable' Contender For GM Unit - Source
13 May 2009 - 7:56AM
Dow Jones News
A potential offer for the European assets of General Motors
Corp. (GM) by Canada's Magna International Inc. (MGA) is seen by
the U.S. auto maker as viable, people familiar with the situation
said Tuesday.
Amid intense talks on both sides of the Atlantic, Magna's
interest could frustrate efforts by Fiat SpA (FIATY) to acquire GM
assets in Europe, Latin America and South Africa alongside its
planned pact with Chrysler LLC.
While German politicians have signaled that Fiat's plans are
more advanced, Magna's offer is viewed as a viable option and is
receiving serious consideration.
"Both deals are viable and very much in contention with each
other," a person familiar with the situation said.
Magna has remained tight-lipped about its interest in GM assets,
which are understood to focus on the Adam Opel AG unit in Germany,
which would be used to expand into central Europe and Russia.
The company finally confirmed its interest last week, and CEO
Donald Waker said on a conference call that "we are in talks with
Opel, GM and German government officials regarding potential
alternatives for the future of Opel, which could include Magna
taking a minority stake."
The company couldn't be reached for comment on Tuesday.
Canada's Globe & Mail reported that Magna has proposed
taking a 20% stake in Opel, alongside 35% held by other partners.
GM would take 35% and employees would hold 10%.
GM Chief Executive Fritz Henderson said Monday that the auto
maker would consider holding a minority stake in the unit.
Magna's negotiations are taking place in Europe, while Fiat's
talks are centered in Detroit, the person familiar with the
situation said. "Teams are working like crazy on both deals," said
the source familiar with discussions.
German Economics Minister Karl-Theodor zu Guttenberg said last
week that Fiat's proposal was more detailed, while Magna's is more
a rough concept being refined.
While Magna's core auto-parts business has been hit by the
slowdown in global auto production, it has C$1.3 billion in cash
that could be used to fund a GM deal. Fiat is understood to be
proposing an initial cash-free offer, mirroring its planned
investment in Chrysler.
While GM is racing to offload the overseas operations and
troubled unit by the end of May as it survives on U.S. government
loans, Henderson has acknowledged a European solution could take
longer.
Magna's investment would be around $260 million, according to
the Globe & Mail. Russian auto maker OAO GAZ Group confirmed
its interest in partnering with Magna on a Opel deal.
Fiat, an established auto maker on the global scene, is
considered a logical suitor for Opel. But the German government has
spoken out against Fiat's plans to shut down a German engine
factory.
-By Sharon Terlep and Jeff Bennett; 248-204-5532;
sharon.terlep@dowjones.com