Magna Consortium Gets Opel, but GM Retains Large Hunk
September 10, 2009
General Motors Co. announced Thursday it will sell a majority interest in its European Adam 
Opel AG and Vauxhall units to a consortium comprised of Canada's Magna International Inc. and Russia's Sberbank.
But a key aspect not prominently discussed in GM's months-long process to shed its currently unprofitable European operations: The company will retain a significant 35 percent interest.
The Magna/Sberbank coalition will own a 55 percent stake of the "new" Opel. The company's employees will hold a 10 percent interest.
"This really is the best solution for the long-term sustainability of Opel/Vauxhall," said John Smith, GM group vice president of business development, who led the negotiations.
Most important -- and likely a key reason for GM's eventual decision to construct a deal that allowed the company to retain a sizable interest in the new Opel -- GM and Opel's new majority owners plan to stay closely linked for ongoing product-development efforts.
"There will continue to be a very close cooperation," on global vehicle architectures and powertrains, among other product-development efforts, Smith said in a conference call with reporters.
A statement from GM went even further to describe the future relationship: "The agreement will keep Opel/Vauxhall a fully integrated part of GM's global product development organization, allowing all parties to benefit from the exchange of technology and engineering resources."
Intellectual Property: No Big Deal After All?
Smith said there are four core binding agreements in the deal, which is expected to close no later than November 30. The financial structure remains much as was reported leading up to the announcement of an agreement: The German government will inject 4.5 billion euros and the Magna/Sberbank coalition will invest about 500 million euros.
One point of tension present from the beginning was the potential for technology transfer to Russia, given the presence of Sberbank as a new owner, an entity closely tied to Russia's second-largest automaker, GAZ.
Smith said that although there was "some occasional excitement" about intellectual property rights in a deal involving a Russian entity, the new Opel ownership agreement will be no different in this regard than with any of GM's other joint-venture arrangements.
He said that between now and 2014, GM "will support" its partners regarding technologies used for any Opel or Vauxhall in the product plan. For existing models, the "new" Opel -- and by extension, GAZ -- will have intellectual-property support.
Smith's brief explanation begs future amplification, but this seemingly means GM will have some sort of gatekeeping authority on current or already-developed GM technologies or patents, while any new developments, either by GM or the new Opel through 2014 might be accessible by all stakeholders.
Opel Won't Compete With GM -- for Now
Of further interest are the regions in which the agreement stipulates the new Opel will not be able to sell Opel- or Vauxhall-branded models: The U.S. is "totally restricted." Nothing can be done in Canada until at least the fourth quarter of 2012 (although Smith says Canadian production or sales of Opels in any near-term time frame are unlikely). South Korea is restricted.
And China is off-limits until "about 2015," so as not to conflict with GM's powerhouse brand in the region, Buick. Some current or coming Buicks and Opels are very closely related -- the new 2010 Buick LaCrosse and the Opel Insignia are on the same global midsize-car architecture, for example -- but Smith said that by 2015 the two brands' product lines should be sufficiently diverged.
GM Likes Joint Ventures
Saying GM is "very successful in collaborative business models," Smith says GM expects the same good results it has enjoyed with other joint ventures such as its GM Daewoo Auto & Technology operations in cooperation with South Korea's Daewoo, and in which Suzuki Motors and China's Shanghai Automotive Industry Corp. also hold stakes.
The ownership structure of the new Opel indeed appears to be one in which GM will hold marked authority, but cedes management to an auto-related company (Magna) with leaner practices that presumably can improve efficiencies and profitability.
Magna brings a 70-year history with GM and "an operating culture that is very important," said Smith, noting the company's reputation for lean management and operation practices -- neither of which have been strong points for GM.
For the first three years, GM and Magna/Sberbank will split management duties and positions. After that, Smith said the management structure likely will be determined by what appears to be in the best interests of the company.
Smith says the new Opel is projected to be profitable by 2011. At that point, the company will begin repaying the 4.5-billion-euro loan from the German government, which it is hoped will be erased by 2014. From there, Smith says Opel will be in a position to begin paying dividends to its shareholders.
GM's agreement to sell the majority of Opel/Vauxhall to Magna and Sberbank does not include a provision to directly buy back that stake in the future, Smith said. Should any of the parties seek to part with any or all of their investment, GM does hold the right to first refuse the opportunity to purchase any stake its partners wish to sell. -- Bill Visnic
Posted by Michelle Krebs at 12:19 PM under Companies , GM , Technology | Comments (0) | digg this | Seed Newsvine
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