“I’LL TELL YA WHAT’S SATISFYIN’—CASH!”

5/22/09

This is a (n almost) pure follow-up post to my 5/16/09 post, “HAIL CAESAR!”:

It looks like interest in Opel is wider than was earlier thought. In addition to Fiat’s bid, which involves no cash but a merger of Fiat’s automotive operations with Opel to form a new company that would assume all Opel’s debts and possibly afford GM a minority interest, bids involving cash are reportedly on the table from the Canadian auto parts maker Magna and RHJ, a buyout firm with extensive holdings in the car parts business. This morning, talk has arisen of a bid from an unidentified Chinese company. This one might be real, but such talk always seems to arise when substantial developed world automotive assets are on the block. Take this one, as all others, cum grano salis.

I have no idea who will win this bid. The German government is reported to like Magna’s bid, and Magna has extensive experience as a major subcontractor to auto companies worldwide, including assembling Mercedes E-Class sedans and BMW X3s at its Magna Styr subsidiary’s operations in Austria. And cash is always nice.

As for RHL’s bid, one wonders whether, in the current climate, the German, or any, government would want to have an auto manufacturing it is working to save fall into the hands of a buyout firm whose bid will, despite rabid denials, involve plenty of leverage (Note Cerberus’s repeated insistences that its Chrysler bid involved no new debt.), especially when there are alternatives available.

In any case, it looks as though there will be viable alternatives to the Fiat scheme. This would be a favorable development for Fiat and Chrysler; perhaps Fiat CEO Sergio Marchionne will not be afforded the opportunity to have his apparent bout of megalomania get the better of him. But maybe not; Fiat’s bid still makes at least as much sense as the rival bids for Opel, if only because of the relative sizes of Opel, Fiat, and Magna, the questionable financing of RHL, and the possible non-existence, or the lack of experience, of those supposedly always lurking Chinese bidders.

Again, though, even Mr. Marchionne’s being saved from himself won’t be enough to save Chrysler; it’s doomed. See my 5/1/09 post “CAN THEY MAKE IT? CAN THEY MAKE IT?”