Germany Picks Magna to Buy Opel

RUSSELSHEIM - May 30, 2009: It was announced early this morning that German Chancellor Angela Merkel’s government has chosen Magna International Inc. as the buyer for General Motors Corp.’s Opel brand and that a financing plan aimed at helping the money-losing unit avert insolvency has been arranged.

Magna, the Canadian car-parts maker, was competing with Fiat to acquire Opel until Fiat CEO Sergio Marchionne decided to back off. The report states that Magna will invest in the Russelsheim, Germany-based carmaker according to a late night statement made by Finance Minister Peer Steinbrueck in Berlin after a meeting with leaders including Merkel. Germany will provide a 1.5 billion-euro ($2.1 billion) loan to keep Opel afloat. Officials said as many as 11,000 jobs may be lost across Europe, including 2,600 in Germany.

“You can be sure that we didn’t take the decision lightly. All the federal and state representatives are aware that there are some risks,” Steinbrueck told reporters. “We have a high interest in maintaining employment at all four Opel sites.”

Included in GM's sale of the majority stake in Opel is the UK's Vauxhall brand. This deal is seen as one of the critical parts needed to satisfy the U.S. government-imposed June 1 deadline to restructure. Germany, which led the search for an investor, has a say because of General Motor's request for loan guarantees. Opel will be placed under a trust today, shielding it from a GM bankruptcy that could be announced as early as Monday.

Merkel, facing national elections on Sept. 27, is under pressure from lawmakers and labor unions to save the 25,000 German Opel jobs out of GM Europe’s 55,000 positions.