Late GME bid makes Vauxhall promise

Posted on 14 Jul 2009 by The Manufacturer

RHJ International has confirmed it is back in talks to buy Vauxhall’s parent company General Motors Europe (GME) and says it will keep British production in place.

The Belgian firm is now in direct competition with two other bidders – China’s Beijing Automotive Industry Corporation (BAIC) and the Canadian-Russian Magna – for the European arm of GM, which also owns the German Opel brand.

RHJ International, which is owned and run by the same man as the US private equity firm Ripplewood, say it has been in discussion with General Motors for “a number of weeks” and has now backed itself to complete the purchase over the coming days.

RHJ’s takeover proposal says the Vauxhall plants at Luton and Ellesmere Port will be kept open, a detail which will provide some hope to the 5,000 staff from the factories who are still sweating over their futures.

And if jobs are protected, RHJ could may well be the more attractive option for both the German and UK governments, based on the fact that its proposals list only a £3.8bn state loan backing, compared with the £4.5bn that Magna has deemed necessary. These figures relate to Opel though and it is currently unknown what they would seek from the UK.

RHJ has also vowed to make the firm profitable again by 2011 and to repay state loans by 2015.

But Sky’s senior business producer, John Holliday, says a successful RHJ bid might not be the best option for all GME employees.

“As with many a private equity firm, RHJ will cut jobs at the outset, strip out some costs and run it as profitably as it can,” he says. “Then in three years time it will sell it back to GM – for a handsome profit.”

RHJ has also declared it will keep Germany’s plants open but the main Opel trade union, IG Metall, is backing Magna for the sale, saying they have sought workers’ views and would protect their interests. The union also told a German newspaper, Handelsblatt, that if GME was to be sold back to the US General Motors, via RHJ, it would lead to the company’s ultimate collapse.

Magna was considered the only serious bidder for GME up until recently and looked odds-on favourites to win the race. However, talks have stalled due to issues relating to intellectual copyright and the royalties that it would have to pay the US General Motors.

RHJ’s success is thought to hinge on whether it can convince the German government that it is of a different moral breed to other private equity company’s and that its intentions for GME are not simply self-sufficing.