GM Said to Back RHJ Offer or Bankruptcy for Opel Over Magna Bid

General Motors Co.’S Opel unit may be forced into bankruptcy should the U.S. automaker and the German government fails to agree on a buyer, according to three people close to the trust that controls the division.
The trust’s five-member board doesn’t back an offer by Magna International Inc.; the Canadian parts maker preferred by Germany, said the people, who asked not to be identified because the talks are private. They said the officials favor a bid from investor RHJ International SA or pushing Opel into insolvency.
“I’m surprised at that,” said David Cole, chairperson for the Center for Automotive Research in Ann Arbor, Michigan. GM is concerned that a Magna deal mights imperil control of some patents, one people said. Germany, which agreed with back Opel’s sale with 1.5 billion Euros ($2.1 billion) in short- term loans, picked Magna as its preferred bidder in May to protect jobs amid the worst recession since World War II.
The Opel trust was set up as an interim owner of the Russelsheim, Germany-based unit, and oversees talks with the suitors. It also has to approve any business decisions by Opel, including which bidder will win.
‘Soap Opera’
Opel’s fate “has been an interesting soap opera,” said Joseph Phillippi, an analyst at Auto Trends Consulting in Short Hills, New Jersey. Nicole Mommsen, a spokeswoman for the Opel trust, declined to comment and referred to a July 25 statement by the trust that it has not yet made a preliminary decision on the bids.
GM signed a non-exclusive memoranda of understanding with Magna in May. It has continued to hold talks with Brussels-based RHJ, whose automotive assets include some former holdings of Ripple wood Holdings LLC. With the Magna deal at risk, bankruptcy becomes the options while Detroit-based GM still prefers a sale.
“We simply cannot move foreword on the bid presented by Magna, a bid that is substantially out of line with the memorandum of understanding the government endorsed, and we are working with Magna to get the bid to a level that can be executed.”
GM’s board will review bids for Opel during a meeting starting Aug. 3, people familiar with the planning have said. The trust will gather to discuss the bids the following week, said two of the people. The directors of the trust, chaired by Fred Irwin, are Dirk Pfeil, a former state lawmaker who now represents Germany’s four states with Opel plants; Manfred Wennemer, a former Continental AG chief executive officer, who represents the German federal government; Enrico Digirolamo, chief financial officer of GM Europe; and GM’s negotiator, John Smith.
The trust owns 65 percent of Opel, with GM holding the remaining 35 percent.
Meg Reilly, a Treasury spokeswoman in Washington, declined to comment on Opel. Arnaud Denis, a spokesman for RHJ; Daniel Witzani, a spokesman for Aurora, Ontario-based Magna; and Ulrich Wilhelm, a spokesman for the German government, could not be reached for comment yesterday.
A government-sponsored study by Lazard Ltd., the U.S. investment bank advising Germany on the Opel sale, showed that RHJ’s offer is superior, said one of the people. Lazard spokeswoman Judi Mackey declined to comment.
Magna’s bid is preferred by labor unions, German state governments and the Social Democratic rivals of German Chancellor Angela Merkel, who faces Sept. 27 elections.