EU warns GM/Magna deal ‘may breach competition rules’

General Motors’ plan to sell a 55 per cent stake in its European division, which includes Vauxhall/Opel, is in jeopardy after the European Commission warned that Germany’s state aid for the Magna International-led bid may breach competition rules.

It had been expected that GM and Magna would sign the deal last week. However, European Commissioner for Competition Neelie Kroes has now said that there were ‘significant indications’ that aid promised by the German government to the ‘new’ Opel was subject to the pre-condition that a specific bidder, Magna, was selected to acquire a majority of the shares in the business.

The Commissioner indicated that such a precondition for the aid would be incompatible with EC Treaty state aid and internal market rules.

However, the German government has insisted that the deal had not been put at risk by the EU’s concerns.

In a letter to Germany’s Economics Minister, Karl Theodor zu Guttenberg, she highlighted her concerns and said that GM should be given the opportunity to reconsider the outcome of the bidding process on the basis of firm written assurances by the German authorities that the aid would be available, irrespective of the choice of investor or plan, in order to ensure the long-term viability of the ‘new’ business, and subject to reasonable financing conditions.

But the minister responded by saying that ‘if there are misunderstandings that need to be cleared up, we will do that. I’m confident this will happen in the coming days. Answers will be given and they’ll be he right answers’.

The UK government and other governments of countries where GM has plants have complained to the EC that German aid, amounting to €4.5 billion had strings attached linking it to GM choosing to sell a majority stake in its European operations to Magna. As such the aid broke EC rules and thereby excluded alternative plans.

Neither the German government nor Magna has yet given any reaction to the Commission’s comments. The UK’s Department for Business, Innovation & Skills also declined to comment.

However, Chris Preuss, GM’s global vice-president for communications, said that if the proposed sale to Magna ‘couldn’t pass EU regulations, we’d have no recourse but to reconsider the deal’.

“Right now though we are working on a defined agreement with Magna and it’s a complicated process with a lot of dialogue,” he added. “There are a lot of discussions going on at the moment, and there’s a lot of detail to be ironed out between the German government and the EU.” (EU/BBC.co.uk: October 17/Sunday Telegraph: October 18).

• Spanish unions have rejected Magna’s latest offer for the future of Opel’s plant in Zaragoza and will vote on strike action, a union leader has said. (BBC.co.uk: October 19).

Car crime pushing insurance premiums up at fastest rate for 15 years

Increased car crime is driving up car insurance premiums at their fastest rate for 15 years, according to AA Insurance.

Over the last three months, premiums have risen 5 per cent, with thieves often targeting expensive vehicles.

Once these are stolen they are often never found as they may be taken overseas, cloned or dismantled for parts.

Yet AA Insurance believes that much of the car crime is down to driver carelessness.
For example, there has been a 15 per cent increase in claims this year from people who had their car keys stolen from inside their house.

Common tactics include fishing for keys through the letterbox; breaking in to a house at night or when it is obviously empty; pickpocketing or stealing handbags to get keys; breaking into places where drivers might have left keys such as gym lockers or cloakrooms; taking keys from desks, jacket pockets or drawers in workplaces and violently pulling drivers out of their car when parking.

AA Insurance also warned drivers against leaving their cars running to warm them up on frosty mornings.

AA Insurance director Simon Douglas said: ‘”Keys are the weakest link in the car theft chain and modern cars can’t easily be taken without them.

“Unfortunately, many drivers still leave keys in their cars even for a moment, for example, popping back into the house because they have forgotten something, at petrol stations or while feeding a pay-and-display machine or parking meter.” (Daily Telegraph: October 19).

Lotus profits in reverse

Lotus, the historic British marque, reversed from a £2 million after-tax profit to a £14.6m loss in the year to March, according to the car manufacturer’s latest accounts.

This was driven by increased costs as its owner, the Malaysian car company Proton, invested in it through the recession.

The company took on 185 staff to prepare for last July’s launch of the Evora, its first new model in 14 years. And in an effort to boost turnover, new variants of existing models were introduced and the dealer network expanded to cover more emerging markets including Saudi Arabia, Indonesia and Taiwan.

But the downturn has taken its toll as Lotus produced only 2,202 cars during the year compared with 2,649 in 2008. Revenue from sales and services fell 5.9 per cent to £73.7m but this was offset by growth in Lotus’s high-tech engineering consultancy division which left revenues for the year up 1.9 per cent to £110.9m. However, the increased investment battered the company’s profit margin as costs rose 16.6 per cent to £124.2m.

Parent company loans from Proton increased nearly six-fold and bank loans rose by a factor of 10 to bring total borrowing to £72m. Shareholders’ funds slid from £17m to a deficit of £4.5m, but the accounts state that another Proton subsidiary will support Lotus as necessary for another 12 months.

With deliveries of the Evora underway, the road ahead should be smoother. The Evora, the world’s first mid- engine, four-seater supercar, will debut in the US early next year with an automatic variant, following in 2011. North and South America are Lotus’s largest markets bringing in £36.2m.

In contrast, the UK is not only Lotus’s second-smallest market but it is the only one which declined during the year shrinking by 5.6 per cent to provide £24.5m of the company’s turnover. (Independent on Sunday: October 18).

New reports says road pricing cuts traffic congestion by 25 per cent

A report by computer giant IBM on using the latest technology to improve city planning has praised the use of sophisticated urban road charging.

The report follows news that the UK’s Committee on Climate Change recommended that the Government reconsiders introducing road pricing.

The IBM report claimed that in Stockholm, road pricing cut inner-city traffic by 25 per cent and polluting emissions by 14 per cent, while boosting inner-city retail performance by 6 per cent. (Fleetnews.co.uk: October 19).