How To Guides
- Childbirth & Education
- Legal Formalities
- Pensions & Benefits
- Property & Accommodation
Did you know...?
- Airports and Airlines Spain
- Paramount Theme Park Murcia Spain
- Corvera International Airport Murcia Spain
- USD weekly currency update- 12 February 2016
- When Expat Eyes Are Smiling
- Meet Wincham at The Homes, Gardens & Lifestyle Show, Calpe
- QROPS 2014
- Spain Increases IHT in Valencia & Murcia
- Removals to Spain v Exports from Spain
- The Charm of Seville
- Gibraltar Relations
- Retiro Park : Madrid
- Wincham announce opening of Marbella office
- Community Insurance in Spain
- Calendar Girls
- Considerations when Insuring your Boat in Spain
- QROPS – HMRC Introduces changes that create havoc in the market place
- QROPS – All Change From April 2012
GM and Magna face risks with Opel deal
When General Motors Chief Executive Fritz Henderson saw the automaker through bankruptcy in July, he emerged with a new mantra.
The new GM, he said, would focus more on making cars and less on making deals.
Fast forward two months and Henderson and the new board installed under the oversight of the U.S. government are enmeshed in one more big deal: the sale of the automaker's Opel brand.
Under intense pressure, GM's board agreed to sell a 55-percent stake in Opel to a group led by Canadian auto parts maker Magna International.
In the end, analysts said, GM had no choice.
A sale of Opel to rival bidder RHJ was unacceptable to the German government and keeping the European unit would have been too costly.
GM was "backed into a corne" said IHS Global Insight analyst Tim Urquhart.
Under the deal, Detroit-based GM will retain a 35 percent stake in Opel, with Magna and its Russian partner, state-owned bank Sberbank, taking 27.5 percent apiece, and European workers the remaining 10 percent.
For GM and Magna, the announcement of the framework deal on Thursday marks the beginning of a new period of uncertainty in a global car market being reshaped by the collapse of its once dominant player, analysts said.
"They have chosen the solution that is the most obvious, financially speaking" said Philippe Barrier, an analyst at Societe Generale. "But on the other hand, it seems to me it wasn't their first choice. They didn't have any choice - after the bankruptcy they couldn't do what they wanted."
BE CAREFUL WHAT YOU WISH FOR
By selling Opel, GM will be able to focus on shoring up sales in its home market where they have dropped 35 percent this year and market share remains on a slide, analysts said.
But by selling Opel, GM is ceding control of a business that accounts for more than 70 percent of its European sales.
Opel's Russelsheim operations in Germany have also been the center for developing vehicles key to GM's attempted turnaround in the U.S. market, such as the Chevrolet Malibu sedan.
"I think what it illustrates to me was just the difficulty of unwinding Opel out of GM in that it's really become a piece of the entire company" said Jeff Schuster, executive director of global forecasting at J.D. Power.
The Opel sale carries significant risks for GM at a time when other automakers including Volkswagen, Toyota Motor Corp and Fiat are looking to scale up to survive in a consolidating industry. Toyota overtook GM as the No.1 global automaker in 2008.
Sales for Opel and its British affiliate Vauxhall accounted for about 18 percent of GM's global total in 2008.
Magna, run by founder and chief executive Frank Stronach, hopes to use its Opel stake to boost its presence in Russia, a high-potential market.
But to make the move pay it needs to cut Opel capacity in Europe - a costly and politically sensitive task.
Magna will also have to balance its work as a car manufacturer with its established business supplying parts to the companies that it will now be competing against with Opel.
"It's a bit of a sticky situation in that all of a sudden you have companies like Ford that are customers of Magna but that are also going to be competitors" said Autoconomy.com analyst Erich Merkle.
Already VW has said it would reconsider doing business with Magna and analysts say other automakers could also step back.
"We see a risk, that at least initially, some existing Magna customers will be reticent about dealing with a firm that is both a supplier and a competitor" said S&P equity analyst Efraim Levy.
Magna's Stronach has made no secret of his ambition to move into manufacturing vehicles. The Opel sale comes after potential deals for Magna to make cars in Russia with both GM and Chrysler fell through in recent years.
But other recent entrants to the high-cost sector such as private equity firm Cerberus Capital Management have been forced out by the complexity and cost.
"Buying and running a car company is not an easy task as Cerberus has found out and I think Fiat will find out" Merkle said. "I fear Magna may also find it out with Opel."
Latest News & Stories
- Andalusia property owners must register under new rules
- Spain likely missed deficit goal in 2015: economy minister
- The 6 Year Sickie
- Spanish government using courts to avoid freedom of information requests
- Rajoy refuses PSOE leader handshake
- New businesses in Spain rises by 0.5 pct in 2015
- 2 New cases of Zika in Spain brings total to 9
- Spain housing sales rise 11.1 percent in 2015 y/y
- Session to name Spain’s next PM may take place in early March
- Podemos deputies to be moved from “nosebleed section” of Congress