Magna Buys Opel, Vauxhall: International Reactions From Joy To Anger To Legal Threats

The deal to sell General Motor's beleaguered European brands, Vauxhall and Opel, is close to the finish line. But while the German government is congratulating itself, other nations in Europe are upset. Belgium is even considering a probe into what they see as German protectionism.

A British union banner outside a vauxhall plant in Luton. While all the German Opel plants formerly belonging to General Motors will be retained, the Luton plant will most likely close. Zoom
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A British union banner outside a vauxhall plant in Luton. While all the German Opel plants formerly belonging to General Motors will be retained, the Luton plant will most likely close.

While German Chancellor Angela Merkel was celebrating, the rest of Europe was not quite as jubilant on Friday about the imminent sale of Opel.

Perhaps most seriously, Belgian Deputy Prime Minister Didier Reynolds told the news agency Belga that there should be an investigation by the European Commission as to whether this was a case of German protectionism. The German government has been accused of trying to push General Motors into selling its European operations -- which include Opel and Vauxhall -- to a consortium of investors that includes Canadian-Austrian car parts supplier Magna and Russia's Sberbank, by sweetening the deal with promises of financial aid worth up to €4.5 billion. Although GM was uncertain about the pair, Magna was widely seen as offering the best deal for the German stakeholders.

Belgian Labor Minister JoŽlle Milquet said that she feared that the Opel deal was endangering European unity. According to John Smith, GM's vice president and the chief negotiator in the Opel deal, a Belgian plant in Antwerp is now in danger of closure.

"I think that the German government negotiated a deal purely in Germany's interest. There has not really been any European cooperation and this is a pity," Milquet told the news agency. And Belgian trade unions are advocating for a distribution of labor over all of Opel's European plants so that none of them necessarily need to be shut down.

Spanish Advise Magna To Think Twice

In Spain there was also criticism leveled at the Germans. In the Opel plant at Figueruelas, near the city of Zaragosa in northeastern Spain, around 1,650 jobs out of the 7,500 there may be endangered. Spanish trade unions, one of which has threatened severe protest action in the face of heavy job losses, had actually been fans of the deal offered by GM's other suitor, the Belgian-based private equity investor RHJ International. The Belgian offer would have apparently resulted in fewer Spanish layoffs. The Spanish minister for tax and the economy, Elena Salgado, advised Magna to carefully consider the fact that Opel's Spanish plants, where the Corsa and Meriva models are made, were some of the most profitable and productive in all of Europe.

In Brtain, politicians were making similar statements, pushing for Magna to make decisions based on business rather than politics. Magna would now also be responsible for GM's Vauxhall auto manufacturing plants and late on Thursday, the Canadian-Austrian car parts supplier advised the British that it would be difficult to keep Vauxhall's Luton plant open after 2012. They did confirm their commitment to Vauxhall's Ellesmere Port plant, however.

Still, some in the United Kingdom have criticized their government, saying they had been outmaneuvered by the more aggressive tactics of the German government. The UK had said it was willing to offer financial aid of several hundred million -- estimated between £300 million and £400 million -- to help Vauxhall while the German government had offered €1.5 billion Euros to tide Opel over, as well as €3 billion more in ongoing aid.

German Jobs at Expense Of British Ones

Vince Cable, the deputy leader of Britain's Liberal Democrats and that party's treasury spokesperson, expressed fears that Germany's "deal" might protect German jobs at the expense of British ones. Tony Woodley -- general secretary of Unite, the largest trade union in the UK with almost 2 million members -- said it was necessary to "make sure that British plants and people are not treated disproportionately during the restructuring that will take place."

In an interview with the BBC, British business minister Pat McFadden defended his government, saying it had "nothing to apologize for" and that it had done its best for British workers. "We will now continue our discussions with Magna: they have told us of their commitment to continuing production at both Ellesmere Port and Luton and we will work to make sure we get the best possible outcome for the UK," McFadden concluded.

Some British commentators have suggested that their government may come forward with financial aid for Vauxhall. Still, as Cable wrote in an editorial in the Daily Mail newspaper earlier this year while negotiations were still ongoing "the issue facing Britain, and other European Union countries, is whether to try to out-bribe the Germans. This is a dangerous game. Ö It is also vital to uphold EU rules on subsidies and unfair competition," Cable wrote, "without which there would be descent into ruinous erosive nationalism."

European Commission May Be Called In

The fact that other nations may want to investigate Germany's so-called "deal" with Magna could cause problems. There has been a lot of discussion in Europe recently about what defines protectionism and unfair competition within the continent's ailing auto industry.

In a February statement released after a meeting with French Industry Minister Luc Chatel -- the French government provided their carmakers with around €6.5 billion in aid that month -- European Commissioner for Competition Nellie Krose said that when considering aid to the auto industry, "we must not lose sight of the fact that overcapacity in the car sector existed already before the crisis, and that European carmakers will need to restructure anyway if they want to compete in global markets."

And in fact, as some industry analysts have noted, in many ways the deal with Magna fits that philosophy. There will be restructuring, which will involve positives -- more streamlined production -- as well as negatives, the loss of thousands of jobs. But as a result of this deal other markets will also open up to Opel and Vauxhall at a time when the European car market itself is shrinking.

Russians Overwhelmingly Enthusiastic

One of those new markets will be Russia. And there news of the sale of Opel to Magna and Sberbank was greeted with overwhelming enthusiasm. "Opel Comes To Russia," the business newspaper RBK Daily boasted. "Opel Turns Russian," the daily newspaper Izvestia trumpeted. Russian Prime Minister Vladimir Putin was also pleased. GM had made "the right choice with a clear amount of social responsibility," Russian news agencies reported him saying to members of an international discussion forum. "I hope that this is one of the first steps that will take us towards real integration into the European economy," Putin added.

The Russians -- and in particular, the outdated Gorky Automobile Plant (GAZ) which has close ties to Sberbank -- have been trying to get their hands on modern German manufacturing technology for some time. Russian business newspaper, Vedomosti, hoped that the Russian partners would "have the right to utilize all the new engineering developments that the German firm comes up with." Whether patents, licenses and new technologies migrate to Russia without a fight from GM -- this was one of the American parent company's biggest fears -- without a fight remains to be seen.

Meanwhile on Friday, Ulrich Wilhelm, the German government's chief press officer, tried to allay concerns being expressed by neighboring nations. There would be cuts in all the countries involved, he said. But the Germans hoped that the burden will be shared equally and amicably, he said in a press conference.

cis -- with wires

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