Fiat vs. Magna: The Battle for Opel

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Marchionne has apparently recognized that he has more work to do. Last Friday, he paid his respects to the governors of the western German states of Rheinland-Pfalz and Hesse, Kurt Beck (SPD) and Roland Koch (CDU). The Fiat chief executive was charming in promoting his plans, Beck reported after the meetings, and yet Beck's concerns about a proposed merger with Opel were only amplified.

Koch, who was also less than enthusiastic after meeting with Marchionne, asked the Fiat chief executive to submit an offer to Commerzbank.

Opel's second potential buyer, parts supplier Magna, has yet to provide the German government with a detailed plan. Unlike Fiat, the Magna executives contacted their counterparts at Opel first to examine the potential benefits of joint operations.

The consortium could provide Opel with sophisticated Magna technology. The company builds the X3 sports utility vehicle for BMW in the Austrian city of Graz. Magna could use Opel plants that are currently not operating at full capacity to assemble other carmakers' models, a practice it already pursues in its own plants.

The Russian partners in the potential deal would provide Opel with access to the promising Russian market, where vehicle sales could double in a few years, say Opel managers. But these potential buyers of Opel also raise questions. Automaker GAZ faces its own severe crisis, and Russian bank Sberbank will likely lose money this year.

Neither Magna nor Fiat is an altruistic prince charming determined to rescue Opel. And no matter which buyer ends up sealing the deal, factories will have to be closed and jobs cut. Nevertheless, government experts believe that Fiat has the better prospects, especially now that it has succeeded in its bid to acquire a stake in Chrysler. Marchionne's connections at the US Treasury Department, which has de facto control over GM, are considered excellent.

Also, Marchionne probably enjoys a better reputation at GM headquarters than Oleg Deripaska, the Russian oligarch who owns GAZ. "They will pick someone they know from the industry," suspects a German government official. If that happens, says the official, the German government will have no choice but to give its blessing to the deal by providing loan guarantees. In an election year, there could be no other option.

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