Magna wants Chevrolet Russia as part of Opel deal

Magna International Inc.'s offer for German automaker Opel is sputtering over its request that rights to General Motor Co. Chevrolet vehicles in Russia be included in the deal.

The Canadian auto supplier is locked in a bidding duel for Opel with Belgian investment firm RHJ International SA. Magna, bidding together with Russian state lender Sberbank, wants GM's Chevrolet Russia business to be part of the Opel transaction, sources indicated Tuesday. GM is balking because Chevrolet is its high-volume seller in the region and it's highly profitable.

Magna's bid is clearly preferred by several German politicians and labour leaders, but its final offer as presented to GM varied from what the parties had discussed in previous weeks and contained elements around intellectual property and GM's Russian operations that could not be implemented, John Smith, GM's chief negotiator for the Opel sale, wrote on the company's Europe blog Tuesday.

"GM has partners in other parts of the world who have joint ownership of these assets," Mr. Smith said.""We simply could not execute the deal as submitted."

Those partners include Avtotor, which builds GM vehicles in the city of Kaliningrad, and Avtovaz, which operates a joint venture with GM in Togliatti that builds the Chevrolet Niva sports utility vehicle. Avtovaz is 25% owned by French carmaker Renault. GM's Chevrolet vehicles in Russia are based on products from its Korean Daewoo unit. Korea's government-run Development Bank is a major shareholder in GM Daewoo and is keen on seeing it grow.

Talks on reformulating a bid with Magna continue, Mr. Smith said. He said the rival bid from RHJ is completed and "would represent a much simpler structure and be easier to implement."

A deal with Magna could still get done. But GM would have to get something significant in return, people familiar with the matter said.

Magna's offer for Opel centers on a business strategy that would see sales of Opel vehicles expand dramatically in Russia and the post-Soviet states. Russia is backing the bid because it wants to use Opel technology to revive its own auto manufacturing capability, centered on Russian billionaire Oleg Deripaska's automaker GAZ.

As part of that commercial strategy, sources said Magna and its partner are also seeking control over all or part of GM's Chevrolet business in Russia. The Russian Chevrolet unit is said to be a cash machine for GM because it sources vehicles free of the country's import duty on foreign vehicles, making it a crucial unit as the automaker seeks to reverse nearly US$88-billion in losses accumulated since 2004.

"Not only is Magna having difficulty with this intellectual property issue, they're having difficult understanding that they're not going to get Chevrolet," said Warren Browne, GM's former top executive in Russia. "You're not buying a country. You're buying a brand -- Opel."

Mr. Deripaska has toured the GM-Avtovaz assembly factory and "understands" its value, one source said. Russia's political leaders and Magna executives are also familiar with the operation.

They'd be getting one of the leanest manufacturing facilities in Russia, with an experienced workforce, said the source. "Magna gets to jump in and doesn't have to clean up anybody's mess. They could walk into that plant and get 85,000 to 100,000 units worth of capacity without untangling anything."

Mr. Deripaska's GAZ is still struggling to modernize its car lines and assembly operations. According to Russian media reports, its passenger vehicle business is close to collapse and last week received another state bailout of 5.6 billion roubles ($195-million).

Aurora, Ont.-based Magna and Sberbank are together offering 500 million euros ($766-million) for Opel and its U.K. unit Vauxhall. The partners have offered to pay more cash right away than initially planned. They will each take a 27.5% stake in Opel. GM would retain 35% while Opel workers would be offered 10%.

GM takes more time to negotiate Opel sale

General Motors is taking more time to negotiate with Magna and RHJ International over the planned sale of its European arm Opel, the U.S.-based company said on Tuesday.

Canadian auto parts group Magna and Belgium-based RHJ are locked in a takeover battle for Opel, in which GM is relinquishing control in return for state support.

GM was expected to recommend one of the two bidders to its new board of directors at a meeting on Monday. But it said on Tuesday it merely brought the board up to speed on talks without making a recommendation as negotiations were still dragging on.

German government officials and GM representatives are expected to meet with Magna and RHJ this week to further discuss the sale, sources said earlier this week.

GM, which holds 35% of Opel shares, and Germany, which will provide state aid, must agree on the buyer but so far the two have disagreed. Germany prefers the Magna offer and GM likes RHJ's bid.

German Economy Minister Karl-Theodor zu Guttenberg had said in a weekend newspaper interview both suitors had to improve their bids to win government backing.

Magna, a Canadian auto parts supplier, wants to expand Opel's full-scale car assembly business and forecasts high growth rates, particularly in Russia, home of its bidding partner, state-controlled bank Sberbank.

RHJ aims to shrink production to return Opel to profit and may be open to selling it back to GM at a later date.

Ford remains top carmaker in Canada

Ford Motor Co. says it was the top-selling carmaker in Canada again in July, the second straight month it has stripped the title from perennial volume leader General Motors Co.

Ford said it sold 26,788 cars and trucks last month, a 47% increase over July 2008 and its ninth consecutive month of market share increases. Total sales for the automaker through the end of July are 2.3% higher than last year. The company said sales of its Fusion, Mustang and Escape among models were particularly strong.

Ford is offering a promotion to consumers whereby if a buyer test drives a Ford but ends up purchasing a competing product from a competitor, Ford will offer the consumer $100.

Other automakers also posted strong results last month. Volkswagen boosted sales 14.6% year-over-year. Hyundai saw a 37% sales increase.

Automakers report sales in Canada throughout the day Tuesday.

Toyota Will Make Hybrids in Britain

Toyota Motor Corp. said it will produce hybrid vehicles in Europe for the first time next year, as it pushes ahead with its leading gas-sipping hybrid cars across the globe.

Toyota, the world's largest hybrid maker, aims to gather momentum by enticing cost-conscious customers with its hybrids in the region, where it is struggling with a relatively small 5% share of the overall market.

The world's biggest car maker by sales volume said it will manufacture a hybrid version of the Auris subcompact hatchback in the U.K. from the middle of 2010. It will spend three billion yen ($32 million) to prepare for production.

The U.K. will be the fifth country outside Japan where Toyota makes hybrid cars or plans to do so. The company already builds hybrids in China and the U.S. and will begin production in Thailand later this month and in Australia in early 2010.

The latest decision on U.K. production follows a strategy that the company's newly appointed president, Akio Toyoda, outlined late last month. He aims to promote hybrid car sales in Europe where customers looking for more fuel-economic vehicles tend to buy diesel-powered cars.

Toyota is betting on its leading technology combining combustion engines with electric motors to spur demand in Europe for low-emission cars that are cheaper to run.

The auto giant also aims to offer hybrid versions of all of its vehicles by 2020.

Core components of the system such as the batteries and the motors will be shipped from Japan, a Toyota spokesman said.

Nissan Motor Co. said it is considering expanding its limited offerings of hybrid vehicles by installing its own gasoline-electric system technology in more models to catch up with rivals such as Toyota.

The Japanese car maker, in which Renault SA holds a 44% stake, follows Honda Motor Co. and Mazda Motor Corp. in seeking to beef up its hybrid lineup.

Honda said July 13 that it will launch two new gasoline-electric hybrid vehicles next year, while Mazda is in talks with Toyota over using components of Toyota's system for its hybrid vehicles.

Nissan has lagged behind major hybrid makers including Toyota, Honda and Ford Motor Co. as the company has focused more on developing electric cars. It plans to roll out electric vehicles next year in Japan and the U.S.

India June Car Sales Rise 7.8%

Car sales in India rose for the fifth straight month in June, driven primarily by lower lending rates and the introduction of new models from auto makers.

Sales climbed 7.8% in June to 107,531 cars from the 99,741 sold a year earlier, showed data issued Wednesday by the Society of Indian Automobile Manufacturers industry group.

Higher borrowing costs and a slowing economy reduced demand for cars and two-wheelers in Asia's third-largest automobile market last year.

But sales began to recover earlier this year after a slew of stimulus packages, including tax cuts, from the federal government and a lowering of borrowing rates by financial institutions.

Compared to a year earlier, car sales grew 22% in February - the first monthly rise since last September - 1% in March, 4.2% in April and 2.5% in May.

"Overall, the auto industry has exhibited a positive trend in volume growth over the last four to five months," Vaishali Jajoo, an analyst at Mumbai-based Angel Broking, said in a recent report.

Ms. Jajoo, however, said the rising trend in vehicle sales will only be confirmed when auto makers report a gradual positive trend in volumes over the next couple of months.

Automakers in India have introduced several new small cars and sedans since January in an effort to lure more customers.

Maruti Suzuki India Ltd. began selling the Ritz, its seventh small car model, in May as it worked to maintain its leadership in the expanding market.

Sales at Maruti - a unit of Suzuki Motor Corp. - gained 12% to 54,693 cars as the market leader sold more A-Star, Ritz and Swift cars.

Fiat SpA introduced its Grande Punto hatchback last month, with the company lifting car sales to 2,464 units in June from 500 a year earlier.

Second-ranked carmaker Hyundai Motor Co. posted a 5.2% rise to 23,013 cars, while Tata Motors, the country's third-largest auto maker, rose 3.2% to 13,732 cars.

Sales at Honda Motor Co.'s local unit increased 13.5% to 5,039 cars in June, boosted by the introduction of the Jazz hatchback model.

"Our full-year outlook was based on stimulus packages," Dilip Chenoy, SIAM's director general told reporters, referring to the association's annual sales outlook announced in April. "Currently nothing has changed and it is too early to factor in the impact of the monsoon."

Normal monsoon rains are considered key to higher sales of cars, commercial vehicles and motorcycles in India's growing rural markets. About half of the country's agriculture depends on monsoons rains.

Monsoon rains are forecast to be below normal this year and auto makers have previously said they are studying for possible impact of this delay on their sales.

SIAM had forecast local car sales to grow 3%-5% in this fiscal year that began April 1. Truck and bus sales may grow 7%-10%, while that of motorcycles and scooters are projected to rise up to 5%.

Local sales of trucks and buses slid 12.5% to 36,193 vehicles in June because of a decline in sales of medium and heavy commercial vehicles.

Sales in the medium and heavy commercial vehicle segment declined 31% to 15,659 vehicles as Tata Motors and Ashok Leyland - the top two manufacturers - posted lower sales in a slowing economy.

Light commercial vehicle sales, however, increased 10% to 20,534 units in June.

In the motorcycle segment, sales gained 16% in June to 550,833 units as Hero Honda Motors Ltd., Yamaha Motor Co. and Honda Motorcycle & Scooter India Ltd. saw an increase in demand.

Motorcycle sales of second-ranked Bajaj Auto Ltd. and third-ranked TVS Motor Co., however, declined.

Scooter sales rose 25% to 111,980 units in June, with Hero Honda, Honda Motorcycle and TVS posting higher sales.