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Canadian firm Magna wins bid for Opel

Video by Richard TOMPSETT


Latest update : 2009-05-30

Canadian group Magna has reached an agreement with General Motors to invest in its German unit, Opel. Magna, not an automobile maker, is already one of GM's associates in North America and accepted to give the US giant a 40% holding.

AFP - How did Italian car maker Fiat, which won the favour of US authorities for a takeover of Chrysler, stir such a deep mistrust in Germany with a subsequent bid for Opel?
Fiat got off to a poor start in Germany, with its interest in Opel widely rumoured and even confirmed by politicians while the head of the Italian group continued to deny a bid was even being considered.
A rival, and eventually winning offer by Canadian auto parts group Magna was much more discreet.
Fiat also faced immediate opposition from German trade unions, with an initial project forecasting the loss of 18,000 jobs and the closure of 10 plants.
A second Fiat plan trimmed the numbers to 10,000 job cuts and six plant closures, including one in Italy, but the damage was already done.
Magna also plans to eliminate 10,000 posts but the label of ruthless cost-cutter had already been attributed to the Italian group.
German workers were also worried because Fiat and Opel produce similar kinds of smaller cars and compete head-on in the Western European market.
The Italian company's argument that a carmaker needs to gain critical mass in sales apparently failed to convince Germans who fear they would pay the price for a consolidation of the two manufacturers.
An earlier tie-up between Fiat and Opel's parent group General Motors also left Opel workers with a bad taste in the mouth.
From 2000 to 2005, GM and Fiat were partners in Europe and South America.
The agreement collapsed however, and GM was forced to pay Fiat 1.5 billion euros (2.1 billion dollars) in fines.
German Finance Minister Peer Steinbrueck said Saturday after late night talks with US officials and GM executives and Magna executives that the bid of the Canadian auto parts maker had been selected.
The final decision is made by GM and US officials and not by Germany, but Berlin has a say in matters because any successful bidder for Opel is likely to benefit from billion of euros (dollars) in German state loan guarantees.
Talks between Fiat boss Sergio Marchionne and GM directors, meanwhile, appeared to have hit some bumps as well.
According to press reports, GM refused to see its controlling stake in Opel cut to 10 percent in a new group dominated by Fiat, along with a part of US rival Chrysler and other assets in Europe and South America.
GM reportedly wants a stake of at least 40 percent in a new company in exchange for its own assets.
Magna, which is not an automobile maker, is already one of GM's associates in North America and is willing to give the US giant a 40 percent holding.
Magna's top-level engineering staff is well placed to help develop environmentally friendly vehicles on which Opel's future could depend, and the Canadian group is backed by Russian carmaker GAZ, which would open up that country's coveted market. Russia's top bank, Sberbank, is also backing the Opel bid.
Magna also has an Austrian card to play, meanwhile.
Although the group is Canadian, it was founded by an Austrian and counts former Austrian chancellor Franz Vranitzky among its board members.
"We speak the same language," German auto expert Ferdinand Dudenhoeffer told AFP.
"And spaghetti and potatoes don't go together, unlike Kloesse and potatoes," he added in a reference to an Austrian speciality based on the same vegetable.
Fiat on the other hand had been targeted by comments that suggest a German bias against southern European companies.
Several press editorials have noted that Germans are more willing to take holidays in Italy or hire Italians to work in German factories than they are to see an iconic industrial group taken over by an Italian group.
Researcher Roberto Goldin told AFP that "old prejudices" about Italians and the poor quality of Fiat cars in the past might not have played a central role in "the battle," but that they fed industrial arguments put forward by trade unions.

Date created : 2009-05-30