Welcome back to square one, GM.
You may have thought the question of who gets Opel had been put to rest months ago. (I did.) But it's actually taken weeks of hemming and hawing for General Motors to decide whether it really does want to sell Opel. Turns out it does.
As The Wall Street Journal details, pressure from the German government to get a deal done has finally persuaded GM to throw in the towel. Backed by German government loans, Magna International (NYSE: MGA) will be permitted to "buy" Opel.
Why "buy"?
Why the quotation marks? Because as "sales" go, this one is a doozy:
- For one thing, Magna doesn't actually get all of Opel. Ten percent of the equity goes to the company's labor union, while GM will hang onto a 35% stake.
- For another, the 55% that Magna does get will actually be split three ways among the Canadian automaker, and Russia's GAZ Group and Sberbank.
- Third and most curious of all, Magna won't pay a dime for Opel. GM's giving it away for free. (Siemens (NYSE: SI) shareholders will recognize the feeling of deja vu, and Motorola (NYSE: MOT) investors can also sympathize.)
Why so magnanimous, GM?
Besides bending to pressure from the German government and unions, GM gets to be quit of money-losing Opel -- but not without strings attached. The most stringent of which is Magna's agreement not to market Opels in the U.S. or Korea, to avoid the Chinese market until 2015, and endure self-imposed exile from Canada until 2012. GM will also still get to use Opel's engineering facility for its own product development.
So is this a good deal or what?
It may seem impolite to go searching for cavities in GM's gift horse, but the strings do invite untangling. From my perspective, this deal is good for Magna (if not as good as I'd like). Sure, it would be nice to have access to the world's two largest car markets. But given its lack of name-recognition locally, I doubt Opel would be a big seller stateside, at least.
In contrast, Opel boasts 9.3% market share in Europe. As for other markets ... well, maybe the less Magna competes with its car-parts customers Toyota (NYSE: TM), Tata (NYSE: TTM), Ford (NYSE: F), and Honda (NYSE: HMC) in selling cars, the better. If limiting its competitive efforts while it learns to run a car company allays their concerns, so much the better.
And once they're well lulled into complacency ... then Magna can take the world by storm.
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