The Opel affair

General Motors and Canadian auto supplier Magna have reached a preliminary deal regarding GM’s European Opel brand. According to Reuters, the companies have agreed on a plan to allow Magna to invest in the German automaker.

“We have an agreement in principle between GM and Magna,” one source said.  Magna and GM still have details to work out before the two are expected to meet with German Chancellor Angela Merkel. One government spokesman said separately that the meeting had been pushed back until 6:00 p.m. to provide time for the ongoing negotiations. 

While an agreement has been reached between the two parties, the German government – which has agreed to provide financial assistance for Opel – needs to sign off on the matter. Magna and GM have signed a memorandum of understanding that will reportedly help Opel secure some 1.5 billion euros ($2.1B USD) in bridge loans, as well as shore up protections against creditors in the event of a GM bankruptcy.

For its part, Magna will reportedly pour somewhere between 500-700 million euros into Opel, and it plans to cut 10% of the marque’s workforce in Germany – about 2,500 employees.   Interestingly, GM will reportedly hold on to a 35% stake in the brand, while Opel workers themselves will end up with 10% of the company.

The future of Vauxhall?

No word yet on what will happen to Vauxhall, Opel’s UK twin.  But it looks like Magna might also be adding Vauxhall to its portfolio.  According to a  report filed by Dow Jones on CNN Money the U.K. Business Secretary Peter Mandelson said that it is “pretty likely” Canadian car components makerMagna International Inc. (MGA) and General Motors (GM) will become shared owners of U.K.-based carmaker Vauxhall.

Speaking to Sky News and BBC television, Mandelson said he would seek a “very early” further meeting with the parties once the initial talks had been concluded to secure a “cast iron guarantee” on U.K. production and employment.

“I have no doubt that the British government … will be asked to underwrite the deal financially and I have already said that the British government in principle would be prepared to consider that, but that would be linked to production and employment in the U.K.,” he said.

GM’s U.K. unit has two plants manufacturing Vauxhall, Opel (OPL.V), Renault ( RNO.FR), and Nissan (NSANY) models and employs a total of about 5,500 people.