GM considers keeping Opel as pressure mounts

GM is considering a plan to raise funding to keep Opel as an alternative to selling the unit to Magna Int'l, sources with knowledge of the deliberations said. The development comes against a backdrop of escalating labor tensions and political stakes over GM's slow-moving effort to sell control of Opel and its British affiliate, Vauxhall. The Obama adm pledged to stay out of GM's choice of a buyer for Opel, while union leaders in Germany put pressure on the U.S. automaker to make a decision. At a board meeting, GM directors declined to endorse a sale of Opel to Magna, sending the automaker back into negotiations this week with the German gov't. While GM remains focused now on trying to clear remaining issues with the Magna deal, execs are considering other options, including raising over $4B in a bid to keep Opel, sources said. Because GM is barred from using funding from the U.S. gov't to support its int'l operations, one of the options can include raising money by selling or mortgaging automaker's assets in China, one of the sources said. Berlin & the German states host Opel plants made clear they want Magna to get Opel & are set to provide 4.5B euros ($6.4B) in state aid to make it happen. Germany has already provided 1.5B euros in bridge financing for Opel. As a result, German trustees overseeing a majority stake in Opel have to approve a deal after it clears the GM board. With an election looming, German officials also threwntheir support behind the Magna bid for Opel because of the view it would be the best option for preserving jobs. Talks over Opel dragged on for months, frustrating its 50,000 European employees. On Monday, labor leaders for Opel's 25,000 workers in Germany protested the delay by rescinding an agreement to forego vacation pay, demanding some 70M euros ($100.1M) in cash next week, sources said. "This is the first warning shot," a source said. Separately, Opel labor leader Franz threatened spectacular measures if GM did not make up its mind soon. "We've been calm so far, listened diligently & made comments, but that is over now," he said. GM's expected to reach a decision on whether to sell Opel to Magna, or to Brussels-based investment firm RHJ Int'l GM emerged from bankruptcy in July with 60% gov't ownership after taking $50B in financing. But White House Deputy Press Sec Burton said President Obama's adm had no plans to get involved in its decision regarding Opel. "The president's view is decisions made on the day-to-day operations of GM should be made by folks at GM. He never wanted to get in the auto business & is happy for them to make the decisions & get back on their feet," he said. As German gov officials grew increasingly anxious over Opel, Fin Minister Peer Steinbrueck called GM's delay annoying & urged a quick decision. In an interview published in the paper, Steinbrueck was quoted as saying the gov't won't offer bridge financing to RHJ. "It's my impression the GM management likes the investor RHJ Int'l because it would be easier for GM to buy Opel back in a few yrs," it said. Opel's fate can influence Germany's fed election in Sept. GM said the RHJ offer would be easier to implement than the Magna plan, which involves an equal equity stake for Russian bank Sberbank & an industrial partnership with Russian automaker GAZ. One concern analysts see for the deal is GM's ability to control its intellectual property & vehicle technology in the Russian partnership. German Foreign Minister Steinmeier sought help from Secretary of State Clinton over the weekend to resolve the Opel issue. He was told she'd only relay Germany's concerns to the Treasury Dept, which oversees the GM investment. The Opel sale reps a test of the U.S. gov relationship with nationalized automaker. Any U.S. gov pressure on GM regarding the Opel decision can cause broader concerns about fed influence in commercial decisions of a range of companies that received taxpayer support in the past year. It also could scare away investors crucial for a GM IPO planned for as early as next year. Erich Merkle, analyst at Autoconomy in Grand Rapids, said Obama needed to resist political pressures surrounding the Opel decision. "If you are not interested in running an automaker, the gov't shouldn't be making this decision for GM," Merkle said.