Germany picks Magna bid for Opel

BERLIN: Germany on Saturday picked Canadian auto parts maker Magna International and its Russian backers to take over General Motors' Opel unit, in a deal that will keep the brand on the roads and save as many European jobs as possible.

"We have an agreement," Finance Minister Peer Steinbrueck told reporters following marathon, late-night talks between top German politicians, US government officials, and GM and Magna executives.

The deal, spearheaded by Magna and backed by Russia's state-controlled Sberbank, will see Russian automaker GAZ making Opel vehicles in Russia, as well as maintain Opel and Vauxhall production elsewhere in Europe.

It goes some way to securing the future of GM's operations in Europe and tens of thousands of jobs in Germany -- a boost to the country's politicians only four months before elections.

Although the final decision on the fate of GM's European operations rests with Washington and GM itself, Berlin plays a key role as Opel employs 25,000 workers and the German government will have to stump up billions of euros (dollars) in loan guarantees.

"You can be certain that we did not take this decision lightly, as all participants were very aware of the risks," Steinbrueck said.

"But you have to weigh these risks against the risks that would have arisen if Opel were to be declared insolvent."

He said that agreement had been clinched on the three main sticking points: the creation of a trusteeship that would protect Opel in the event of a GM insolvency, loan guarantees and a bridging loan to keep the firm solvent.

Berlin is expected to provide some 4.5 billion euros (6.4 billion dollars) in loan guarantees as well as 1.5 billion euros in temporary loans to keep Opel afloat.

For its part, Magna -- a major global player in the auto industry, though little known to the general public -- has said it will inject around 700 million euros into the ailing firm.

It will, however, slash some 10,000 jobs across Europe as part of the plan, with 2,500 of these in Germany.

Under the proposal, GM would keep 35 percent of the company and Opel's workers would retain 10 percent. Magna would hold a 20 percent stake and Sberbank 35 percent.

The Canadian company, front runner in the race to snap up Opel from the beginning, fought off rival bids from Italian car maker Fiat and Brussels-based investment firm RHJ International.

Fiat dramatically pulled out of talks on Friday saying it was unwilling to expose itself to "unnecessary and unwarranted risks" and that it had insufficient information on Opel.

The firm's boss, Sergio Marchionne, was philosophical about Magna's victory, telling reporters in Montreal that he was mainly focused on completing a merger with the number-three US automaker Chrysler.

"If the Opel transaction is not available for Fiat, life will move on. We will continue to work with what we have," said Marchionne before the deal was struck in Berlin.

An earlier round of all-night talks collapsed acrimoniously on Thursday, with Berlin accusing GM and the US government of moving the goalposts at the last minute and using "scandalous" negotiating tactics.

GM suddenly demanded some 300 million euros (423 million dollars) more than expected in bridging loans, on top of the 1.5 billion euros Berlin has already said it would provide.

In total, GM employs about 55,000 people Europe-wide, including around 7,000 in Spain, 4,700 in Britain at Vauxhall, 4,000 in Sweden at Saab, 3,600 in Poland, 2,600 in Belgium and 1,800 in Italy.

In Moscow, German Gref, chief executive of Russia's largest lender Sberbank, said in televised comments Saturday: "As a bank, we are interested here that the car industry of the Russian Federation could be restructured with the help of the acquisition of such an asset."

"In my opinion, this is a very good chance for Russia to receive one of today's most technologically advanced European producers at an unprecedentedly low price," said Gref, a former economic development and trade minister.