In a setback for Fiat's plans to become the world's second-largest automaker, German government sentiment appears to favour a rival bid to Fiat's for ailing GM's German unit, Opel, from Canadian auto-parts giant Magna International.
"The Magna concept [bid for Opel] focuses heavily on new ideas, new markets and new clients, while the other [bidders] focus more on rationalization," Roland Kock, premier of Germany's Hesse state, told German radio.
Unions representing Opel's 25,000 employees oppose a Fiat bid they believe would result in significant German job losses. Magna has said it would keep all four Opel plants in Germany, and that the 10,000 job cuts under its plan would be concentrated at Opel plants in Belgium and Britain.
The Magna-led consortium bidding for Opel, largest of GM's European operations, also seeks about five billion euros in government support for its scheme, about two billion euros less than Fiat is thought to be asking.
That's another key consideration for the coalition government of conservative German Chancellor Angela Merkel. Ahead of this September's federal election, Merkel wants to be seen preserving German jobs, but wants a minimal role in any state rescue of Opel.
With backing from consortium partners GAZ, a Russian automaker, and Russian lender Sberbank, Magna is touting its greater likelihood of boosting Opel sales in Russia, seen as a fast-growing market once the global recession lifts.
Merkel is to meet today in Berlin to discuss the three bids for Opel with top German officials including leaders from the four states in which Opel has plants, and Berlin could make a decision on which bidder it backs within days.
Koch, the Hesse premier, said the Magna offer was "closest to the hopes and wishes" of German politicians and Opel employees. He described the Fiat offer as disappointing. A third bid, by industrial holding company RHJ International, Koch described as "very interesting."
Magna is the world's third-largest auto-parts maker, after Germany's Bosch and U.S.-based Johnson Controls. The Aurora, Ont.-based firm, launched in 1957 by Austrian emigre tool-and-die maker Frank Stronach, has decades of experience in designing hundreds of parts, from drivetrain components to mirrors and windshield wipers. Traditionally, automakers have designed the parts they send blueprints of to their suppliers.
Also unlike traditional auto-parts firms, Magna has built complete interiors for vehicles ranging from Chrysler's minivans to the BMW Mini Cooper. It is also unique among auto-parts firms in assembling complete vehicles. This is an attribute well-known in German auto circles, as Magna's assembly of Chrysler, Mercedes and BMW vehicles is done at the Magna-Steyr plant in nearby Graz, Austria.
In its bid for a 20 per cent stake and control of bankrupt Chrysler, for which it has won Obama administration approval, Fiat is putting up no money. With $9 billion (U.S.) in debt, Fiat is likely hoping to pay no money for Opel, either, instead earning its equity stake by turning the company around. By contrast, the Magna consortium is offering to invest between 500 million and 700 million euros in Opel.
"Not all jobs can be preserved in a new European Opel group," Koch said. "But there are concepts that offer a more interesting outlook for the German sites than others do. Magna is one that offers a more interesting outlook."