Opel’s future in jeopardy as Fiat skips talks

GM's cash demands - the deal spoiler
Chief executive officer of Fiat, Sergio Marchionne, who has always expressed his keen desire to acquire Opel, said he’s “perplexed” by the GM disclosure that Opel requires an additional 450 million euros of short-term cash.

These sudden and unexpected financing issues prompted Fiat not to attend the meeting in Berlin that may well decide the future of Opel. Marchionne reiterated his interest in taking over Opel, but said that short-term cash demands of GM made the negotiations on the takeover “complicated” and “uneven”.

"The last round of requests which would require Fiat, among other things, to fund Opel on an emergency basis while the German government determines the exact timing and conditions of the interim financing, would expose Fiat to unnecessary and unwarranted risks," Marchionne said.

Sources familiar with the matter revealed that frustration at the only other bidder for Opel, Canadian automobile parts manufacturer Magna International Inc (TSX: MG), was also increasing rapidly due to the new demands from GM.

Confusion on cash requirements
The German authorities had set a 2 p.m. (8 a.m. EDT) Friday limit for Fiat and Magna to rework their respective strategies and reach a pact with GM and the U.S. government.

The initial round of discussions had ended in a stalemate over the question of financial backing that the GM is seeking for its German unit. GM threw an upfront payment requirement of 450 million euros as a part of a 1.5 billion-euro bridge loan. On the hand, the German authorities were of the view that the pressing needs were to the tune of 100 million euros only.

“It is in fact unreasonable to expect, on the basis of prudent business judgment and proper governance of its affairs, that Fiat would provide funds to an organization whose financial details and position remain unknown to date,” Marchionne said.