Fiat pulls out of Opel takeover talks

Italian carmaker Fiat is one of two parties in talks with the German government to purchase Opel.
The future of Opel remained uncertain Friday after Italian car giant Fiat withdrew from talks in Berlin due to concerns over emergency funding demanded by the German government for the ailing automaker.

Fiat had been one of two potential bidders, along with Canadian-Austrian supplier Magna, still in the running to take over Opel, which is currently owned by General Motors. Fiat said in a statement Friday it remained interested in taking control of Opel but said the German government’s demand for the potential suitors to provide $417 million in short-term funding would expose Fiat to “unnecessary and unwarranted risks.” “Fiat remains open and committed to continue discussions with all parties involved with a view to find a stable and lasting solution for the industrial activities of Opel,” Fiat said. Thursday’s talks, which were also about bridge financing to keep Opel running while an investor is sought, were scuppered by the last-minute request from GM for the extra $417 million, German ministers said. The German government said it did not know where to find that amount of money at such short notice and asked Fiat and Magna to rework their bids so they could come up with the funding. Magna said it may be able to offer that amount as long as the German government guarantees the money can be recovered. “We have lots of cash. We’ve got no problem,” Magna Chairman Frank Stronach told reporters Thursday. But, he added, “if we say we arrive at agreement and the United States breaks their agreement and General Motors breaks their agreement, then it’s only fair to say you, the German government, have got to help us recover the money. It’s only fair.” U.S. investment firm Ripplewood dropped out of the bidding process, and a fourth bidder, Beijing Automotive Industry Holding, entered too late to be considered, German officials said. Any bidder for Opel would also be buying GM’s European operations. That means the outcome of the talks would have a direct effect on GM’s other operations across the continent, including Vauxhall in Britain. About 56,000 people work for General Motors in Europe, including 25,000 Opel workers in Germany. Both bidders have mentioned cutting 10,000 jobs across Europe, with about 2,000 jobs at stake in Germany. The reason the company’s fate is currently being decided in Germany is because the German government has offered billions in loan guarantees to any potential investor — more than any other European government has offered.

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That has angered unions in other countries with a GM stake, including the Unite union in Britain. Unite said this week that unless Britain does more to protect GM’s British plants, some 5,000 Vauxhall jobs would be at risk. Watch more about the anxious Vauxhall employees » “The UK government must now finish the job its been working on. That means being at the meeting table when the final decisions for the ownership of GM Europe are made,” said Unite’s joint general secretary, Tony Woodley. “It’s crucial that we don’t allow any other government to drive through a plan which reflects only one country’s interests.” British Business Secretary Peter Mandelson said Thursday he had secured a commitment from both Fiat and Magna that any bid would protect Vauxhall operations in Britain. He said fears for British jobs were unfounded. If the German government fails to find an investor who can provide the bridge loan, Opel and GM Europe may face insolvency. Mandelson said that once the talks have concluded in Germany, there will be a detailed discussion about the new owner’s plans for the various GM divisions and plants in Europe.

Each bidder has different ideas for the future of GM Europe, Mandelson told Sky News. Fiat plans to take over the company and separate itself from General Motors, while Magna would allow GM to retain a stake in the new company and bring in Russian investment. In the meantime, Mandelson said, Vauxhall is not facing the cash shortfall that Opel is, so the British government is not being asked to provide short-term financing for the British brand.