Government doubts Magna/GM takeover

The UK government has expressed doubt over the commercial viability of Canadian car-parts maker Magna’s plans to take over General Motors Europe.

The business secretary, Lord Mandelson, stated in an open letter to European Competition Commissioner, Neelie Kroes, that Magna’s plan would cost more than rival offers.

Peter Wells, director of the Centre for Automotive Industry Research at Cardiff Business School, said this is just another indication the deal has the potential to fall through.

‘It could all go horribly wrong at this point,’ he said.

GM chose Magna earlier this month to take over its European operations. If formally agreed, the deal would see Magna and Russian bank Sberbank owning 55 per cent of the company. GM would still retain 35 per cent and its employees would hold a 10 per cent stake.

‘My gut feeling is that the commercial relationship between Magna, the Russian bank and GM is not likely to be stable in the medium term,’ Wells said. ‘It has all the feelings of an interim arrangement.’