GM’s troubles in Europe continue

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Besieged from all sides, G.M. has failed to achieve a breakthrough in talks regarding its European unit, too. German and American negotiators held a marathon five hour meeting which included video conferencing, but were still unable to come to a conclusion on a bridge loan which G.M. needs for its European operations.

The Germans are understandably hesitant because they don’t want to put up money when they are not sure that G.M.’s European assets will be protected from its bankruptcy proceedings in the U.S. “We don’t have the assurances we need to approve a bridge loan,” said Karl-Theodor zu Guttenberg, the German economy minister. They are also put off by the fact that G.M. has asked for $418 million more than the agreed upon €1.5 billion from Berlin.

There are two companies in the reckoning for Opel – Fiat, the Italian automaker and Magna, a Canadian giant. Both have submitted proposals whereby G.M. would at least retail a minority stake in Opel. Magna says it has the cash to provide the funding that G.M. needs, but wants some guarantee from the German government in case the deal falls through.

Germany is extremely interested in the deal as they can get more leverage by helping out G.M. plus keeping German jobs, while reducing its lending exposure. There is history between the two – G.M. acquired Opel in 1929 and survived all the historic upheavals since then.

Both Fiat and Magna are seriously in the fray. Magna has joined with Russia Sberbank and seem to be favored by the German government. At the same time Sergio Marchionne of Fiat met German government leaders in a bid to sell Fiat’s plan which would result in six million vehicles being made in a year.

In a confused global scenario, who will walk away with the ‘prize’ is anybody’s guess.