Magna International Inc. MG.A-T is in talks to purchase about 20 per cent of Adam Opel AG, the key European arm of embattled General Motors Corp., GM-N part of a deal that would reduce GM's stake in the auto maker to about 45 per cent, industry sources in Europe say.
In tandem with Magna, Russian oligarch Oleg Deripaska would possibly combine with Russian banks to pick up another 30 per cent, the sources said, thus meeting GM's need to find equity investors to give Opel a major cash infusion.
The Magna bid is the latest example of how the global automotive crisis that began in the United States last fall is beginning to radically reshape the industry.
Fiat SpA is in the final stages of negotiating a strategic alliance with Chrysler LLC that is designed to rescue the No. 3 Detroit auto maker. In the midst of those talks - pegged to a deadline this Thursday, as set by the U.S. government - Fiat is also reported to be considering investing in Opel.
GM has put other European brands and some of its North American divisions - such as Hummer and Saturn Corp. - on the block as well. Ford is likely to sell its Volvo cars unit.
Opel is in dire financial straits because of the global auto meltdown, which has driven its parent company to the U.S. and Canadian governments for billions of dollars in financial aid.
And bankruptcy protection is a possibility if GM can't reach deals with the United Auto Workers, its debt holders and the U.S. Treasury Department.
The investment would be strategic for Magna, giving it a closer relationship with a key European customer, which could decide to manufacture some vehicles at Magna's currently underutilized complex in Graz, Austria, where it assembles vehicles on contract for several auto makers, including putting together Saab models for GM.
It could also underpin Magna's strategy in Russia, which the Canadian auto parts giant sees as a key expanding market over the next decade. Magna teamed up with Mr. Deripaska two years ago in a venture that included him ending up with a 42-per-cent stake in the parts company. He was forced to sell it last year, however, when he had to raise money because of the credit crunch.
Russia was GM's second-largest market in Europe last year. About 100,000 of the 337,810 vehicles the company sold there were Opel models. Chevrolet is GM's largest brand in Russia, where the auto maker's overall share is about 11 per cent.
It was not clear yesterday how much Magna would have to invest for a 20-per-cent stake in Opel or whether it could be financed through some kind of loan deal with the German government, which is keen to develop a survival strategy for the company, which GM purchased in 1929.
"How much cash does Magna have to pay to get their 20 per cent?" asked one industry source.
Even though Magna barely eked out a profit last year, it is in strong financial shape. It is sitting on about $1.5-billion (U.S.) in cash, but has been husbanding that resource to weather the most severe downturn in the North American auto industry since the early 1980s, to pounce on new opportunities when rivals fail, and to invest in new environmentally friendly and other technologies.
German magazine Der Spiegel reported on the weekend that the country's Economics Minister, Karl-Theodor zu Guttenberg, is scheduled to hold talks with Magna soon.
