UPDATE: German Econ Min: Won't Rule Out GM's Opel Insolvency
May 15 2009 - 8:58AM
Dow Jones News
The German government Friday stepped up pressure in its efforts
to help rescue Adam Opel AG, saying an orderly insolvency would be
an option for General Motors Corp.'s (GM) German unit if none of
the bids for the German carmaker are solid or if a considered
trusteeship fails to get support.
"The trusteeship model with a guarantee... will only materialize
if the yet to be submitted concepts by the bidders are solid,"
German Economics Minister Karl-Theodor zu Guttenberg said in a
statement.
"Should the later not be the case or should the trusteeship
model not be accepted by the participants, then an orderly
insolvency could be a starting point for a successful new beginning
of the company and its employees."
The comments come after the government announced Thursday a
state-supported trusteeship to keep the German carmaker operating,
should its parent company GM enter bankruptcy before Opel can be
sold.
Such a trusteeship step, which includes bridge financing for the
company during the coming months, will only be considered if at
least one of two known bidders for Opel submit detailed feasible
bids by May 20, which have to include plans for the German
production sites and jobs.
The U.S. Treasury and GM would have to support such a
trusteeship which would buy time for negotiations with an investor
in the company's European operations. The advantage for the German
government would be that it will have a direct say in the search
for an investor. At the same time, this would help the U.S. to
maintain its influence in its European operation instead of losing
it to the insolvency procedure.
The German government has ruled out taking a stake in Opel.
Italian automaker Fiat SpA (F.MI) and a consortium including
Canadian auto parts maker Magna International Inc. (MGA) remain the
two prominent interested parties.
A person familiar with the situation has reportedly said that
RHJ International (RHJI.BT), a European buyout firm with holdings
in the auto-parts sector, is interested in GM's European
operations.
GM must institute a variety of cost reductions, including
culling its dealerships and narrowing debt by a June 1 U.S.
government deadline or face bankruptcy.
A trustee solution might be needed because GM might file for
Chapter 11 bankruptcy late May.
A trusteeship and bridge financing would keep Opel operating to
allow takeover negotiations to continue without tapping taxpayer
money.
Opel might get a credit line provided by Kreditanstalt fuer
Wiederaufbau, a state-owned bank for infrastructure financing, and
state-owned banks in states that have Opel plants.
Carl-Peter Forster, head of GM's European operations, which also
includes its Vauxhall unit in the U.K., has said Opel would need
more than EUR1 billion in credit.
State-operated trustee arrangements played a major role in
restructuring East German industry after the country's 1990
reunification.
-By Andrea Thomas, Dow Jones Newswires; +49-30-288-8410;
andrea.thomas@dowjones.com