The German government has approved a deal that would see a majority stake of General Motors' European division sold to Canadian auto parts maker Magna International Inc.
After a second round of high-level talks in Berlin, a deal was reached late Friday night, according to Germany's finance minister Peer Steinbrueck.
"A solution has been found to keep Opel running," Steinbrueck told reporters. "You can be sure that we did not take the decision lightly. All the federal and state representatives are aware there are some risks."
The agreement will see Adam Opel placed under the care of a trustee - expected to happen sometime Saturday. This would protect the German automaker from General Motor likely filing for bankruptcy protection early next week.
According to the Associated Press, Germany's federal government would pitch in a loan of US$2.1 billion to help smooth the deal, though it would have to be paid back later.
Under the terms outlined by the source, Magna would provide short-term financing in order to become the main contender.
Magna co-CEO Siegfried Wolf said he expects agreements with GM to be signed in five weeks time. But he added the deal struck early Saturday would prevent Opel from being touched by whatever will happen to GM.
"We really have taken the risk that was necessary to show a commitment, and we are committed, otherwise we wouldn't have done this deal," Wolf said.
Under the deal:
- Magna will take a 20 per cent stake in Opel;
- the Russian-owned Sberbank will take a 35 per cent stake, giving their consortium a majority;
- GM will retain a 35 per cent holding; while
- the remaining 10 per cent will go to Opel employees.
In Detroit, meanwhile, GM's bid for bankruptcy protection in the U.S. sent ripples through the European talks on Friday.
GM's attempt to achieve Chapter 11 status began to crystallize Thursday when a group of bondholders agreed to trade $27 billion in debt for stock -- a proposal sweetened by Washington.
While the developments with the bondholders looked like progress for the automakers' North American division, it was seen as troublesome for the European negotiations.
GM's continued requests for German funding to keep the European factories functioning, has resulted in a soured opinion of the deal, said BNN's Michael Kane.
"Now the German government is under pressure to actually just let the whole thing collapse and go into bankruptcy," Kane told Â鶹´«Ã½ Channel.
The fact that the parent company in Detroit is seeking bankruptcy -- and is under pressure to take the European division down with it -- only makes things more complicated, Kane said.
"The German government is saying 'wait a minute, you're going to go into bankruptcy protection with the big company, and then you're going to stick us with these European operations that are losing money as well? That's not cool,'" Kane said.
On top of all of that, Fiat's owner is in Montreal and was unable to attend the negotiations in Germany due to a previous engagement -- which Kane said some observers see as a boycott.
"So it's a situation where anything can happen and any transaction that does occur can change the look of everything else," he said.
GM's latest plan
GM's latest plan, outlined Friday in regulatory documents, would see the company enter a period of bankruptcy protection during which it would shed most of its debt, before emerging stronger and leaner.
At the other side, GM would be almost three-quarters owned by taxpayers, with the U.S. Treasury taking 72.5 per cent of stock.
The department has already invested $19.4 billion and would pour in $30 billion more to keep GM running during Chapter 11 -- which AP reports could last 60 to 90 days.
Ottawa is also expected to pump in an additional $9 billion and take a stake of the company, AP reports.
The United Auto Workers will end up with 17.5 per cent of the company.
As part of the restructuring 14 plants are expected to close, erasing 21,000 jobs, though details about which plants are on the chopping block aren't expected until Monday.
With files from The Associated Press
