Italy 0, Canada 1 (with a Russian mid-field)

5th June 09 - Italy 0, Canada 1 (with a Russian mid-field)

The cars and vans made by General Motors always had a good engine. It was the bodywork that often let us down. Now the corporate bodywork at the European end is a bit bent but apparently still in one piece. It is, however, a complicated piece. Fiat were thought to be the front runners to grab control of a slimmed-down Opel/Vauxhall business but Sergio Marchionne the chief executive left the table in a huff saying "This process is taking on the air of a Brazilian soap opera in an election year." This arose at the eleventh hour when it emerged that the US Treasury would not allow the parent company to fund a separate foreign entity. It blew a $415m funding hole. The feeling of xenophobia was strengthened when back home in the US of A, GM revealed plans to build compact cars on home soil rather than import Chinese ones. This will be the subject of a separate diary entry.

What has happened is that a Canadian car parts group called Magna International has won out in a battle by five players to take over GM Europe. The clincher seems to have been that the Canadians (not known as world leaders in take-over battles) vowed to keep all four major car planes in Germany open. This will have had big political as well as economic sway since of the 55,000 workers in GM Europe as a whole, 25,000 are in Germany. The rest are in Belgium, Spain and the Vauxhall marquee in Britain (5,000 head count). Magna has proposed up to 10,000 job cuts overall and the Vauxhall van production line in Luton looks vulnerable even though the UK government is prepared to consider offering loan guarantees to support the deal.

The overall structure does not, in fact, give the Canadians overall control in terms of ownership. It appears more like a management deal. GM would retain 35% of its erstwhile European branch and up pops the Russians via the largest state owned bank Sberbank also with 35%. Magna will get 20% and the last 10% goes to the workers in compensation for their welfare rights. 

We said before in this diary that if Fiat had won through and given that it has already taken a slice of Chrysler, the task of management would be enormous. Dare one say that with the ownership structure as described, a certain parts company from Canada might have a few headaches of its own?