Like many complicated entanglements, it started with a secret meeting in a hotel room. In April, executives from General Motors Corp. huddled with peers from Italy's Fiat SpA to discuss a sale of GM's Adam Opel GmbH unit, the bulk of the Detroit carmaker's European operations. General Motors was just months from its June 1 bankruptcy and had already begun the process of jettisoning foreign units that would weigh on its restructuring.
But Fiat, led by celebrity CEO Sergio Marchionne, wasn't the only one interested in Opel. Commerzbank AG, Germany's No. 2 bank, collected a list of bidders, and within just a few weeks, three names emerged as leading contenders: Fiat, Canadian automotive parts group Magna International Inc. and listed Brussels financial investor RHJ International SA.
The deal appeared to be a straightforward auction, but it was just getting started. The German government got involved when it had to provide a €1.5 billion ($2.2 billion) bridge loan to keep Opel afloat until a new owner could be picked. Facing a late September general election, politicians wanted to appear to be safeguarding the jobs of half of Opel's 50,000 workforce employed in Germany. Negotiations began in Germany's chancellory.
A last-minute bid then appeared from Beijing Automotive Industry Holding Co. Ltd. No problem, government officials said, scheduling a late May meeting for a decision to be made. But German government officials emerged from the chancellory early in the morning flushed, expressing disappointment with GM and the Treasury (which was readying GM's bankruptcy) for sending low-ranking negotiators. The politicians were also surprised by a demand for more of the bridge loan to be provided up front. No bidder was selected, though RHJ International and China's BAIC had been tossed out.
That left Fiat, which was in the process of buying 20% of Chrysler LLC, and Magna, which had teamed with Russia's Sberbank and carmaker OAO Gaz. Then Fiat lurched off the field, saying the changing conditions and tight deadlines made it unfair to shareholders to tender a hurried bid. Just days before GM's bankruptcy, the U.S. carmaker announced a tentative agreement with Austro-Canadian Magna. Tentative, indeed.
GM reopened the bidding, admitting that it feared Magna's Russian partners would use Opel's patents to compete against GM in Russia, where it sells its Chevrolets. The bid from private equity shop RHJI, lead GM negotiator John Smith said in a blog post, was actually superior and easier to implement.
Further complicating the drama was a five-member trust that had been given control of 65% of Opel before General Motors' bankruptcy. The panel, with just four voting members, had to approve any sale and was made up of equal parts General Motors representatives and German representatives.
Rumors about the pending vote swirled for weeks until an August conference call was set with GM's board to pick a winner. That meeting proved fruitless, and analysts began to speculate that the new GM didn't want to sell Opel after all. Magna and RHJI revised their bids, and on Sept. 10, just weeks from a massive election victory, an emphatic Chancellor Angela Merkel announced an agreement between GM and Magna.
GM wouldn't get any cash, and Magna and Sberbank would split a 55% stake. They also agreed to sink €5 billion into a restructuring. In exchange for agreeing to the firing of up to 10,500 employees, Opel's remaining workers would share 10%, while GM would retain 35%. In addition to the €1.5 billion loan, Germany would front €4.5 billion in guarantees and then collect contributions from other governments where Opel does business.
The shocker of the day: The two German members of the trust controlling Opel were opposed to the deal. Manfred Wennemer, a former CEO of automotive parts group Continental AG, said Opel was too small to survive on its own, would be hopelessly in debt and would never sell the number of cars Magna was forecasting in Russia -- a point auditors and analysts have affirmed ever since. To keep the deal moving, politician and insolvency expert Dirk Pfeil agreed to abstain. An agreement was complete.
In mid-October GM won approval for its restructuring plans with Opel's union in the U.K., where it does business as Vauxhall, and was in tough talks with workers in Spain. The sale is scheduled to close before the end of the year, and GM CEO Fritz Henderson has said he expected a definitive agreement any day. At press time, talks between the European Commission and the Berlin government over German state aid were delaying a final signing.
With a little luck and decent car sales, the Opel deal won't end in a courtroom, like more than a few entanglements that begin with secret meetings in hotel rooms.