Beijing Auto signals Opel interest - Chinese carmaker faces three rival bids

Beijing Auto signals Opel interest - Chinese carmaker faces three rival bids
By John Reed in London and Patti Waldmeir in Shanghai
Copyright The Financial Times Limited 2009
Published: May 22 2009 11:42 | Last updated: May 22 2009 11:42
http://www.ft.com/cms/s/0/6d918216-46ba-11de-923e-00144feabdc0.html


China’s Beijing Automotive Industry Corp (BAIC) has expressed an interest in buying a stake in Opel together with the rest of General Motors’ European operations, for which three other companies have already entered entered bids this week.

The Chinese automaker sent a letter expressing interest in Opel to Commerzbank’s Dresdner Kleinwort unit, which is advising GM on the stake sale, on Thursday - a day after a bidding deadline passed, according to two people close to the deal.

BAIC could not be reached for comment, and a GM spokesman at its European headquarters in Zurich declined to comment.

BAIC’s offer was described as an expression of interest rather than a formal bid, and is unlikely to move forward, one of the people said. Italy’s Fiat, Canada’s Magna, and Brussels-listed RHJ International all entered bids for the strategic stake on Wednesday, for which GM is seeking about €650m ($900m).

BAIC is one of China’s leading commercial vehicle manufacturers, and manufactures Hyundai passenger cars in a joint venture with the Korean carmaker. It sold 250,000 vehicles in the first quarter of this year, making it the fifth largest Chinese automaker, according to official figures.

GM’s sale of a stake of Opel/Vauxhall has aroused significant interest despite its financial problems, which could see the company file for “surgical” bankruptcy protection in the US as soon as June 1.

GM’s European operations are to be spun off as a new German-headquartered company, for which the Detroit carmaker is seeking €3.3bn of German and other European government loan guarantees, and in which it will retain a significant stake.

Fiat wants to merge Opel with its own autos division and recently-acquired Chrysler, and Magna’s bid – if successful – would also see Russian automaker Gaz join it in making cars.

One of the people briefed on BAIC’s bid said the carmaker was primarily interested in importing Opel cars or technology to China, where it would compete with GM, one of the country’s largest carmakers. “They would be discouraged from going forward,” this person said, requesting anonymity because of nondisclosure requirements around the sale.

Industry analysts in China were also sceptical about whether BAIC could be a serious bidder, given the costs involved. “No Chinese car company can afford to pay that much money,” said Li Chunbo of Citic Securities in Beijing.

The Chinese government has also discouraged Chinese car companies from making hasty overseas acquisitions of distressed overseas brands that they lack the expertise to manage.

BAIC missed Wednesday’s deadline, and talks on the stake are now “moving quickly,” the second person said, as GM vets the three formal bids before signing a memorandum of understanding with one or more groups.

Magna’s offer has gained key political and union support for its bid. Unlike Fiat, which is offering its assets as payment for the deal, Magna and RHJ are also said to be offering cash, which GM prefers as it faces a liquidity crunch.