Deal reached for Magna to rescue Opel

[May 30, 2009]  BERLIN (AP) -- Germany's finance minister said after a high-level meeting in Berlin that a plan was approved for Canadian auto parts maker Magna International Inc. to move ahead with a rescue of General Motors Corp's Opel unit.

Peer Steinbrueck said the agreement was reached early Saturday after the second round of high-level talks in as many days.

"A solution has been found to keep Opel running," Steinbrueck told reporters after more than six hours of talks. "You can be sure that we did not take the decision lightly. All the federal and state representatives are aware there are some risks."

The agreement will see Adam Opel GmbH put under the care of a trustee later Saturday, shielding the German automaker from GM's likely filing for bankruptcy protection early next week.

The German government and several state governments will provide a euro1.5 billion ($2.1 billion) bridge loan, part of which will be available immediately. Parliamentary committees in two states, Hesse and North Rhine-Westphalia, must still approve the financing. That is expected on Sunday.

Siegfried Wolf, a co-CEO of Magna said he expected the agreements with GM would be signed in five weeks time, but insisted that the deal struck early Saturday would prevent Opel from being touched by whatever will happen to GM.

"We really have taken the risk that was necessary to show a commitment, and we are committed, otherwise we wouldn't have done this deal," Wolf said.

Under the agreement, Magna will take a 20 percent stake in Opel and the Russian-owned Sberbank will take a 35 percent stake, giving their consortium a majority. GM will retain a 35 percent holding, while the remaining 10 percent will go to Opel employees.

The consortium plans to work together with Russian car maker Gaz to produce more than a million vehicles in Russia and Eastern Europe.

As part of the deal, all four factories in Germany will remain in operation, although Magna has said previously it will need to shed some 2,500 jobs.

Chancellor Angela Merkel called the second round of negotiations after talks snagged Thursday over new short-term funding needed to move Opel into an independent legal structure.

The other suitor for Opel, Fiat Group SpA, stayed away from the talks, which began late Friday, saying that it faced "unreasonable" funding demands.

Germany had sought an agreement that would shield Opel - which employs 25,000 people in Germany, nearly half of GM Europe's work force - from a looming GM bankruptcy court filing in the U.S. and extensive restructuring.

The government stressed the need to make Opel legally independent under a trustee so that any German taxpayer assistance would not go to the U.S.

Aurora, Ontario-based Magna International Inc. emerged early on as a leading bidder for a majority of Opel from a consortium that also includes Russian lender Sberbank.

German officials blamed short-term financing needs they said were brought up by GM totaling euro300 million ($418 million) for preventing a decision earlier this week. The government insisted it would not increase its pledge of euro1.5 billion in bridge financing.

While Magna had indicated it would be willing to provide the additional funding, Marchionne said Fiat had decided to pull out of the talks Friday because of the requirement for the emergency funds

Marchionne said it was "unreasonable" to expect Fiat to provide such funding because it had not yet had full access to Opel's financial records and could not determine "its precise financial condition and thus properly frame a merger proposal that would be fair" to both sides.

"The emergency nature of the situation cannot put Fiat in a position to take on extravagant risks," he said in a statement.

Taking over GM's European operations, including Opel and Britain's Vauxhall, was a key part of Marchionne's strategy of creating a car company with the capacity to produce 6 million cars a year, the threshold he says is necessary for an automaker to survive.

Fiat is on the verge of taking control of a 20 percent stake in Chrysler, pending the completion of restructuring in bankruptcy court in New York.

Opel and sister brand Vauxhall also have operations in Belgium, Spain and Poland among other countries. GM officials will not be present.

[Associated Press; By MELISSA EDDY]

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