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A row of car frames await their engines and interiors. (MICHEL WIEGANDT/AFP/Getty Images)
A row of car frames await their engines and interiors. (MICHEL WIEGANDT/AFP/Getty Images)

Magna's Opel bid hits roadblock Add to ...

General Motors Co. threw up a roadblock to the bid by Magna International Inc. to transform itself into a full-fledged auto maker, taking the extraordinary step of using a corporate blog posting to say Magna's offer for GM's key European operations is not acceptable.

While negotiations between GM and the Canadian auto parts giant to take over and restructure Adam Opel GmbH will continue, "we simply could not execute the deal as submitted," John Smith, GM group vice-president and the auto maker's chief negotiator in the Opel talks, said Tuesday in a posting on GM's website.

A competing bid made by Belgium-based investment firm RHJ International "would represent a much simpler structure and would be easier to implement," Mr. Smith said.

The GM statement appears to knock Magna out of its position as front-runner in the Opel race.

His statement sets up a potential clash between GM and the German government, which clearly favours the bid Magna is making in conjunction with Sberbank of Russia and is prepared to finance it.

Germany, meanwhile "made it quite clear that [RHJ]would get no money from the German government," one European industry source familiar with negotiations said. Britain also supports the Magna bid, Mr. Smith acknowledged.

Magna and Sberbank would each own 27.5 per cent of Opel, while its workers - who also back the Magna-led initiative - would own 10 per cent.

GM would retain a 35-per-cent shareholding.

But Mr. Smith said "the bid presented to GM varied from the negotiations we had in the previous weeks and contained elements around intellectual property and our Russian operations that simply could not be implemented."

Among the problems he outlined are partnerships with others around the world that have joint ownership of the assets.

The GM partnerships in Russia include a joint venture with Russian auto maker Avtovaz that assembles the Chevrolet Niva sport utility vehicle and a co-operative agreement with Avtotor that makes three Cadillac models and four Chevrolets, including the Chevrolet Lacetti, the best-selling GM vehicle in Russia.

Magna meanwhile, is hooking up with OAO Gaz, another Russian auto maker, and has been seeking the rights to sell Chevrolet models in that country, which it sees as one of the world's major growing markets in the next decade.

Daniel Witzani, a spokesman at Magna's European headquarters in Oberwaltersdorf, Austria, said there would be no response from the company to Mr. Smith's comments.

Those comments included a statement that the RHJ bid would require less financial help from the German government while still turning Opel and its British unit Vauxhall, into an independent organization in Germany.

One high-ranking European auto source said he believes GM has been emboldened by its relatively quick trip through Chapter 11 bankruptcy protection in the United States and may favour the RHJ bid because it would permit GM to buy back a majority stake in Opel once it has been restructured.

But "the money which was given by the U.S. government and the Canadian government was there to get General Motors on a sound, healthy footing in North America," the source said. "It wasn't meant to bail out [operations] in other parts of the world."

The German government has taken a leading role because Opel's headquarters, four of its assembly plants and about 25,000 of its 50,000 employees are in Germany.

A German state governor who has been involved in talks on Opel's future said Magna improved its offer by raising the amount of money it is prepared to contribute when the deal closes.

Magna is now prepared to invest €350-million ($536.2-million) in Opel immediately after taking a stake, an increase from its original plan to put up £100-million, Hesse state Governor Roland Koch said. The Magna plan includes loans of €4.5-billion from Germany.

With files from Associated Press

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