What next for Opel?

Fiat has made its intentions clear. The Italian firm has officially begun pursuing a merger with General Motors' struggling European operations, Opel and Vauxhall. But Fiat is not alone in wanting the two brands, with auto parts producer Magna International and Russian car maker OAO Gaz also showing interest (more here).

After weeks of rumours about Fiat's interest in the GM operations, the Italian company came clean over the weekend. The board met and empowered CEO Sergio Marchionne (pictured) to begin pursing the deal in earnest.

Opel currently requires €3.3billion in financial aid by June 1 to remain operational, and so far, the German government has refused to step in and provide the money in the same way the US government bailed out General Motors' American operations. GM had originally believed it would have the situation resolved by the end of March; as revealed in the company's February submission to the US Department of Treasury.

Marchionne was due to meet with German foreign ministers this week to begin his merger talks. He believes a deal combining Opel and Vauxhall with Fiat and its newly acquired stake in Chrysler is necessary for all parties to survive.

He has previously gone on record stating that automakers will need to produce at least 5.5million units each year to achieve true economies of scale. Should the deal go ahead, the new company would produce 6.8million units per year and make it one of the world's biggest players.

However Marchionne's plan has been criticised by industry analysts and Opel's works council chief. They believe that an Opel/Fiat merger would create too much debt and an excess of cars.

Magna International is one of the world's largest car part manufacturers and relies heavily on the business it currently has with Opel. In partnership with Russian lender OAO Sberbank and manufacturer OAO GAZ, Magna has already approached the German government about striking a deal.

Reports indicate that under the proposed agreement, Magna would take a 19 per cent stake in Opel with Sberbank and GAZ holding a further 31 per cent between them. But Magna founder Frank Stronach has told European media outlets that the company is not interested in taking control of Opel.

"We don't see ourselves as a white knight. We only want to help," Stronach is reported saying.

"We supply Opel and it has to be in our interest that Opel does well. The market must not be lost.

"We don't talk about taking a stake. We are saying we want to help. Russia could also play a role in this, allowing Opel to secure its market there."

UK publication Autocar reports that General Motors could retain Vauxhall and re-stock its line-up using models sourced from Holden and GM Daewoo, instead of its current Opel-based range. But this appears highly unlikely, as both Fiat and Magna would require the Vauxhall volume to make Opel competitive across Europe.

Instead, the brand with the most to loose under the proposed sale of Opel would be HSV. The firm currently sources the Astra-based VXR hot hatch from Vauxhall/Opel and is known to be considering a similar arrangement with the Insignia mid-size sedan.

Even though HSV is owned outright by Scottish businessman Tom Walkinshaw, it is understood the company is required to source its products from within the General Motors portfolio.

Given the early stages of both the Fiat and Magna bids, it is simply too early to have a proper understanding of just what the impact of Opel's future will have on Australia.

We'll keep you updated, so check back regularly.

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