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...GM's CEO Fritz Henderson phoned Chancellor Angela Merkel's office Thursday to seal the deal. The decision to sell Opel and Vauxhall to Magna is a coup for Merkel who has staked her credibility on the bid, a joint offer from the Canadian car-parts manufacturer and Russia's state-owned Sberbank. Since May, Merkel and the German government have thrown their weight behind Magna's offer, arguing that Magna already had extensive experience in building autos. Berlin also likes the fact that the Magna bid will keep open Opel's four factories in Germany, thus saving more jobs...
...bridge loan to keep Opel afloat, as well as $4 billion in future loan guarantees. The German government also made it clear it wouldn't stump cash for any other bidder. Some politicians accused Merkel of "blackmail" and warned that her government's support for Magna could backfire. Initially, GM had serious reservations about Magna's offer and seemed to favor a rival bid by the Belgian-based investor, RHJ International. One GM official said RHJ's offer was "simple and elegant." In particular, GM was uncomfortable with a Russian company getting its hands on Opel's technical expertise...
...With Germany's federal election on Sept. 27 looming, GM's decision provides a huge boost for Merkel, whose conservative Christian Democrats are already well ahead in the opinion polls. Opel employs 25,000 workers in Germany - around half of GM Europe's total workforce. German unions threatened mass demonstrations if GM decided to keep Opel, fearing that option would lead to thousands of job losses in Germany. With the green light for Magna, Merkel has received an important psychological boost and can now tell voters on the campaign trail that she managed to save German jobs...
...Still, even the chancellor admitted the "new beginning wouldn't be easy." Under the deal, Magna and Sberbank will own 55% of the "New Opel", GM will keep 35% and the company's workers will take a 10% stake. GM's chief negotiator John Smith, who flew in from Detroit for a Berlin news conference, said Magna had come up with the best offer. "Magna has a great manufacturing culture and it enjoys the support of German labour unions, and the funding is there. It makes sense," said Smith. But he also warned of job-cuts. Magna's bid outlined...
...That hard work will include further negotiations between GM and the German government. GM wants to keep some ties to Opel's engineering presence in Germany and also retain a veto over any transfer of its technology to Russia. There are also thorny issues over the details of the financing package to work out, though Merkel said today she was confident the obstacles could be overcome. GM's Smith, said he hoped the deal could be closed by November or December. If that happens, America's biggest auto company will finish 2009 in a very different state than it started...