Home News EU has doubts over Opel sale, little will to challenge it

EU has doubts over Opel sale, little will to challenge it

Published on 21/10/2009

Brussels -- The European Commission may have its doubts that a Berlin-backed plan to save Opel is legal but it is unlikely to challenge the deal for fears it would only drive the automaker into bankruptcy, observers said.

Parent company General Motors (GM) announced last month it would sell a 55-percent stake in Opel to Canadian auto parts maker Magna, with Germany providing 4.5 billion euros (6.7 billion dollars) in state aid to support the deal.

Since then questions have been raised that the package could violate EU competition rules. Belgium and Britain, where Opel also has production sites, complain it would unfairly favour saving German jobs.

But Rudi Kennes, the deputy head of GM Europe’s works council, told AFP that he thought it was unlikely that Brussels would scupper the deal at this late stage.

"At the end of the day I don’t think they will start over," he said.

"On the 1st of November, Germany can ask for its money back. This could mean bankruptcy," the union leader warned.

GM is expected to ink the deal with Magna this week and Kennes believes US executives will not consider pulling out.

"GM has more than enough problems of its own," he said, referring to its recent restructuring in the United States.

But according to a report in the Wall Street Journal on Monday, General Motors is weighing up other options if the sale to the Canadian parts maker does collapse.

"While the automaker continues to prefer a sale to Magna, GM executives are prepared to move to its Plan B if that deal should fall through," the newspaper said, citing people familiar with the matter.

With 25,000 people employed by Opel in Germany, Chancellor Angela Merkel is known to be reluctant to reopen negotiations on the sale after intensively lobbying in favour of Magna.

"There is no need to question decisions that have already been taken," said German government spokesman Ulrich Wilhelm on Monday.

EU Competition Commissioner Neelie Kroes, however, has questioned the use of German public aid to support the transaction, saying there were "significant indications" that it was contingent on Magna winning the bidding for Opel.

Berlin rebuffed those claims, writing to GM and Opel explaining that the aid would be available irrespective of which investor acquired the brand, European Commission spokesman Jonathan Todd told reporters on Monday.

Todd said the Commission was yet to receive "the precise details concerning the financial arrangements" from the German government.

Frank Schwope, an automotive analyst with German bank NordLB, told AFP that the way that the sale has been conducted was "bizarre."

"Other bidders such as RHJ International and (Chinese automaker) BAIC were ignored. In principle, that breaches European law," he said.

Schwope said that he still expects EU regulators to give Magna the green light to buy Opel.

If they failed to do so, "Brussels would make itself very unpopular," he explained. "A new delay would put Opel in danger."

Meanwhile, German media on Monday showed little concern that the deal could collapse.

"The European Commission has done its job. Whether those words are followed by action, that is another story," the Frankfurter Allgemeine Zeitung wrote in an editorial.

The newspaper questioned whether Commission president Jose Manuel Barroso had the appetite to battle it out with the German government over the sale.

"If the Commission had accepted the deal without saying a word, we would have been no longer able to take it seriously (in its role) as the guardian of free competition in Europe," wrote the Financial Times Deutschland.

"(Nevertheless) it is clear that it is not industrial common sense that lies behind Opel’s reorganisation plan but rather the political will to save as many German jobs as possible," the financial daily concluded.

Catherine Marciano/AFP/Expatica