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Hang Lung Makes $5 Billion China Bet to Dodge Rivals

Ronnie Chan, chairman of Hang Lung Properties Ltd., is betting $5.1 billion on China’s consumers.
Soon after taking the helm in January 1991 of the Hong Kong developer his late father founded 30 years earlier and against the wishes of a reluctant executive team, Chan began plans to build shopping malls in China, anticipating an economic boom. This year, the opening of its fourth mall in the nation may propel the company’s rents from the mainland above Hong Kong’s.
“I was chairman and they just had to go along,” he said in an interview at his office in the Standard Chartered Building in Hong Kong.
Chan is spending $5.1 billion to build malls and offices in five Chinese cities outside Shanghai to tap demand for luxury goods, a market CLSA Asia-Pacific Markets estimates will be the world’s biggest in a decade. That’s reduced his reliance on apartment projects at home and steered him away from residential developments in China, housing markets with concerns of a bubble.
It’s also pitting Hang Lung’s fortunes against inflation that threatens to push up construction costs and derail luxury spending. China’s central bank raised interest rates last week for the third time since mid-October to cool prices.
He has been “arguably too bullish, though I think he can continue to deliver,” said Hugh Young, Singapore-based managing director of Aberdeen Asset Management Asia Ltd., which owns Hang Lung shares. “He’s successfully engineered a major shift in the company. We’ve followed the company for 20 years through various booms and busts and there’s depth and substance to him.”
Hang Lung shares fell 0.3 percent to HK$31.50 as of 11:34 a.m. in Hong Kong today. They have declined 13 percent this year.

Commercial Landlord

Founded in 1960 by Chan Tseng-hsi and listed on the Hong Kong stock exchange 12 years later, Hang Lung Group Ltd., the parent of Hang Lung Properties, became one of the first developers in the city to invest heavily in commercial properties. Properties built to lease accounted for 83 percent of total assets at the end of June 2010, according to the company’s annual report.
Its focus on becoming a commercial landlord has helped the company avoid going head-to-head with larger, residential- focused competitors on the mainland, such as China Vanke Co. Hang Lung is Hong Kong’s third-biggest developer by market value.
“I’m too short and when I bump into big guys I let them go first and try to find other ways,” said Chan, 61, who stands at about 1.6 meters (5.2 feet). China’s residential property “is a big market, but also one that has so many mega-domestic players with their own vast and extensive systems in place. How can we compete with them?”
Vanke, China’s biggest developer by market value, last year made 48 billion yuan ($7.3 billion) in revenue from residential sales, while China Overseas Land Ltd., a mainland-based developer listed in Hong Kong, took in HK$36 billion ($4.6 billion), more than any other Hong Kong-based builder.

Ninefold Increase

Hang Lung shares have risen more than ninefold since Chan took over in 1991, while its assets have grown about 8 times. The company is the third-best performer among Hong Kong’s major developers since Chan became chairman, trailing only Sun Hung Kai Properties Ltd. and billionaire Li Ka-shing’s Cheung Kong Holdings Ltd., the city’s two biggest builders, over the period.
Hang Lung, which means “eternal prosperity” in Chinese, completed Grand Gateway in Shanghai in 1999 and last year opened the Palace 66 in the northeastern Chinese city of Shenyang, its first mall outside of Shanghai. Over the next five years, it plans to add at least 1.5 million square feet of mall or office space a year in cities including Jinan, Wuxi, Dalian and Tianjin.
The average rental at major shopping malls in Shanghai at the end of last year was 46.7 yuan per square meter per day, an 87 percent increase from the same period in 2005, according to Seattle-based property broker Colliers International.

‘New Challenges’

The management of those malls may prove challenging, Morgan Stanley analysts led by Coral Ching wrote in a Jan. 27 report.
The company “lacks a proven track record in running a large property portfolio in China,” the analysts wrote. The new malls over the next three to five years will pose “new challenges for Hang Lung at operation level.”
The group’s rental income from Shanghai, where it now operates two mall-and-office complexes, has increased more than threefold since 2005. The opening in August of the Jinan shopping mall will probably help Hang Lung’s rental income from the mainland surpass Hong Kong’s for the first time, Chan said.
Hang Lung’s rental revenue from Hong Kong was HK$2.61 billion in the 12 months ended June last year, compared with HK$1.93 billion from the developer’s mainland China properties.

Luxury Demand

“Their business model is simple: focusing on the retail segment and riding on mainland China’s burgeoning consumption demand,” said Lee Wee Liat, a Hong Kong-based analyst at Samsung Securities Ltd. “It’s hard not to fall in love with a company whose management and local staff have such a clear conviction and passion on the things they do.”
Samsung Securities has the highest 12-month price target, at HK$49.30, among 22 analysts that track the company, according to data compiled by Bloomberg.
Demand for luxury goods and travel from Greater China will account for 44 percent of the global total by 2020, up from the current 15 percent, as its “burgeoning middle class is adopting previously unattainable high-end lifestyles,” CLSA’s Hong Kong- based analyst Aaron Fischer said in a report on Feb. 2.
Stores in Hang Lung’s 120,000 square meters (1.3 million square feet) Shanghai mall include Burberry and Armani. In Shenyang, tenants include Omega and Cartier. The Jinan mall is 86 percent let, Hang Lung Managing Director Philip Chen said at the company’s Jan. 26 earnings announcement, declining to give tenants’ details.

‘Never Again’

Hang Lung’s decision to avoid residential real estate in the world’s most populous nation as housing prices surged may be paying off. With China’s government trying to cool home prices that climbed for a 19th month in December, analysts including Hong-based Eva Lee at Macquarie Securities Ltd. prefer Hang Lung for its relative immunity to potential house price declines.
China has approved property tax trials in Shanghai and the western city of Chongqing and raised the minimum down payment for second-home purchases.
“We tried one small apartment project and after that I said never again,” Chan said. “The taxes are high and mainland officials are mindful about residential prices because it impacts ordinary people’s livelihood. But would they care about how much I’m charging international banks and high-end fashion brands?”
Investors are betting the answer is no: Hang Lung’s shares have gained as much as 200 percent from the trough during the global credit crisis. They are trading at about 16 times 2010 earnings, the highest among Hong Kong’s 20 biggest developers, and 1.5 times book value, the third highest, according to data compiled by Bloomberg.
Unsold Apartments
Hang Lung is seeking to buy more sites in China, Chan said, declining to give details. The company in November raised HK$10.9 billion selling shares, bringing its cash and near cash to HK$24.6 billion, according to the earnings on Jan. 26.
The company has about 1,500 unsold apartments in Hong Kong with an estimated value of about HK$20 billion, according to Samsung Securities’ Lee. Chan said Hang Lung will gradually offload the apartments in stock to fund its mainland expansion.
“We expect to see them start to sell more properties in 2011 and early 2012 to lock in the very high margins on their apartments and recycle capital into their mainland developments,” said Andrew Lawrence, a Hong Kong-based analyst at Barclays Capital.
Chan, who has an MBA from the University of Southern California, lived in the U.S. for a decade and running the family’s business in California when his father died in 1986. He took over from his uncle, who held the chairmanship on an interim basis after the elder Chan’s death.

‘Big Picture’

“When I first took over, our management looked at trivial items like how much a chair or a pen cost, but rarely at the big picture,” said Chan, a former director of Enron Corp. “They didn’t even want to go out and meet investors. So when I said we had to go into mainland China, many of them, of course, were apprehensive.”
Today, his transformation of the company is nearly complete: Hang Lung hasn’t bought any land in Hong Kong for at least 10 years. Hong Kong’s home prices have gained more than 55 percent over the past two years, prompting the government to impose measures to curb the surge.
“I won’t say we’re through with Hong Kong cause you can never say never,” said Chan. “But why would we invest here if our projects in mainland China are giving us nearly 30 percent unleveraged return? For me to start buying in Hong Kong again, things will have to get pretty ugly. I’m not sure I want to see that happening.”

An Iron Ore Rush Above the Arctic Circle

With steel demand growing and iron ore fields in Brazil and Australia locked up by mining's Big Three, Canada is the next resource battleground 

Baffin Island in Canada's frigid Nunavut territory is about as far off the grid as most people can imagine. Subzero temperatures, ice-blocked sea lanes, and a lack of conventional infrastructure make this spot more than 300 miles above the Arctic Circle among the planet's most inhospitable places to do business. That hasn't stopped international mining companies from fighting over the remote turf. The attraction: huge iron ore deposits underneath a barren landscape—a reminder of just how far global mining companies will go to secure new reserves.
After oil, almost nothing is as central to the operation of a modern economy as steel. Everything from appliances to automobiles to skyscrapers depend on the stuff. That has made iron ore, steel's main component, a hot commodity amid the current global resources boom, especially for fast-growing emerging economies.
The price of iron ore has more than doubled in the past two years amid surging Chinese steel production. Most ore exports come from Brazil and Australia, where the world's three biggest mining companies, Brazil's Vale (VALE) and Australia's Rio Tinto Group (RTP) and BHP Billiton (BHP), dominate. That's left other mining companies, steel producers, and big users such as China to fight over the few remaining big iron fields, including desolate Baffin Island.
Luxembourg-based ArcelorMittal (MT), the world's largest steelmaker, and Nunavut Iron Ore Acquisition, a company backed by Houston-based private equity firm Energy & Minerals Group, on Jan. 14 struck a C$590 million ($593 million) deal to jointly acquire Baffinland Iron Mines, whose Mary River project on the island may become the first iron-ore mine inside the Arctic Circle. The estimated cost of building the project, including an 87-mile railroad and a port that can be reached only by custom-built cargo ships able to navigate frozen seas, is more than $4 billion.
Other companies don't want to be left behind. Cleveland-based Cliffs Natural Resources (CLF) in mid-January agreed to pay C$4.9 billion, including net debt, for Montreal-based Consolidated Thompson Iron Mines to lock up iron ore assets in northern Quebec. And Liu Yikang, chief of the Expert Group for Overseas Resources Projects at China's Ministry of Land and Resources told Bloomberg News in mid-January that a Chinese company was involved in the bidding for Baffinland, though he declined to name it.
"There's nowhere else to go," explains Benjamin J. Cox, the founder of Portland (Ore.)-based research company Oren and chief executive officer of Canadian iron-ore mine developer Roche Bay. "There's no rock left unturned in Australia, and anything that's nice in Africa already is controlled."
Baffinland has so far spent almost $500 million evaluating Mary River. To get ore to the coast, Baffinland CEO Richard D. McCloskey says four rivers must be crossed. The company has resorted to using temporary bridges made from shipping containers welded together so rock samples can be moved by truck. Workers also must contend with temperatures that sometimes dip below -50C (-58F). At such temperatures, "steel starts breaking, fuel starts freezing," McCloskey says.
To guarantee deliveries, Mary River will need ice-breaking, bulk-commodity-carrying ships with three times the normal engine power, says Tim Keane, Arctic operations manager for Montreal-based shipper Fednav. Such vessels have never been built and, according to Keane, may cost up to twice the price of conventional vessels. "Ordinary ships don't have the horsepower required to muscle their way through those conditions," he explains.
Mary River has an estimated 365 million tons of reserves in its first deposit (eight others have been discovered so far), based on ore being transported by rail. Production could surpass 18 million tons a year on that basis. That would cause Canadian ore output, which the U.S. Geological Survey pegged at 27 million tons in 2009, to soar. Even so, it would be dwarfed by Brazil's 380 million tons and Australia's 370 million tons of annual production.
Asian steelmakers are already involved in Canadian iron ore. Tata Steel, India's biggest producer, has a joint venture with Canada's New Millennium Capital to mine in the provinces of Quebec, Newfoundland, and Labrador. China's Wuhan Iron and Steel, the world's fifth-biggest steelmaker, owns 19 percent of Consolidated Thompson and has agreed with Adriana Resources of Vancouver to develop the Lac Otelnuk iron-ore project in Quebec.
"There's a feeling in China that the Big Three have taken advantage of China in the past and that's something they want to avoid in the future," says Adriana CEO Allen J. Palmiere, referring to the dominance of Vale, Rio, and BHP.
ArcelorMittal, meanwhile, is reducing its reliance on third-party suppliers by raising its mining capacity. The company said in September it planned to spend $4 billion to increase output to 100 million tons by 2015.
Even before ArcelorMittal's initial bid in November, Baffinland had already attracted other steelmakers' attention. Germany's ThyssenKrupp and Voestalpine reached accords to buy some future output from the Baffin Island field, and Mitsubishi agreed to buy up to 1 million tons a year to sell in Japan and Taiwan. Notes Gordon A. McCreary, chairman of Toronto-based explorer Asia Now Resources and a former CEO of Baffinland: "Huge things are going on in the North."
The bottom line: The world's appetite for iron ore, used in steelmaking, has sparked interest in mining reserves in Canada's desolate Arctic Circle region.

Windfall for power investors

Top job: International Power chief Phil Cox could run the combined groupMore than 360,000 small shareholders in International Power look set for a windfall after it announces a £14 billion merger with French energy giant GDF Suez this week.

More than 360,000 small shareholders in International Power look set for a windfall after it announces a £14 billion merger with French energy giant GDF Suez this week.The deal, expected to be announced on Tuesday alongside financial results from both groups, will give majority control to GDF, 35 per cent owned by the French government.
Bankers are finalising details this weekend that will include a cash element for shareholders of International Power, formed in 2000 after a demerger from the privatised National Power.
At that time, shares were worth 282p. They ended last week at 366p and analysts suggest the deal could value them at 400p. They say that the cash could be limited to 45p a share as GDF must pay £2 billion of International Power's debt.
Sources say the combined group is likely to be run by International Power chief executive Phil Cox with a Frenchman as chairman.
The new company, to be listed in London, will be formed through a reverse takeover. International Power will issue shares in return for GDF ploughing assets into the venture.
All International Power's 45 plants in Britain, the Middle East, North America and Pakistan will be injected into the group while GDF will contribute assets such as its UK and Turkish stations along with some outside Europe.

Logitech Announces Neil Hunt, Netflix Chief Product Officer, as New Board Nominee

Logitech International (SIX:LOGN) (Nasdaq:LOGI) announced that its board of directors will ask shareholders to approve the election to the board of Neil Hunt, chief product officer of Netflix, Inc., the Internet movie subscription service, at the company’s annual general meeting in Lausanne, Switzerland on Sept. 8, 2010.

At the meeting, Logitech shareholders will also be asked to re-elect to its board of directors Daniel Borel, Logitech co-founder, Sally Davis, BT Wholesale chief executive officer, Guerrino De Luca, Logitech chairman and Monika Ribar, Panalpina chief executive officer.

Logitech’s annual report and invitation and proxy statement for the annual general meeting are available on Logitech’s Web site at http://ir.logitech.com. The materials for the meeting will be mailed to Logitech registered shareholders in early August.***

Big Magna shareholders vow fight

Pension funds, others intend to challenge Stronach buyout in court

Major shareholders of Magna International Inc. (MG.A-T72.33-0.67-0.92%) have vowed to continue the battle against the buyout of Frank Stronach’s multiple-voting shares, saying the additional disclosure ordered Thursday by the Ontario Securities Commission does not resolve the bigger problem of the excessive price the company is offering for the shares.
The giant Canada Pension Plan Investment Board will oppose the deal in court when it moves forward for approval by the Ontario Superior Court, chief executive officer David Denison said Friday.
“If it goes that far, we will definitely seek to appear before the court and speak to the issues there,” Mr. Denison said in an interview. “That is the ultimate decision, where the fairness will be determined. As the OSC has indicated, it is not in their ambit to opine on the fairness of it, but this is absolutely required [by the court].”
Magna’s $863-million deal to purchase all of Mr. Stronach’s Class B multiple-voting shares is structured as a plan of arrangement, which means it requires a court to approve the fairness of the deal before it can be completed.

But before the deal can get to that stage, the company will hold a shareholder vote on the offer, which has been delayed following the OSC ruling late Thursday. The commission said Magna must provide more information to investors before a vote can be held, but concluded the transaction is not abusive of shareholders or the capital markets.
“A transaction such as this is not abusive simply because the price proposed to be paid is considered by certain investors to be outrageous,” the panel said.
In its ruling late Thursday, the OSC said it wants significant additional information included in a new proxy circular for shareholders. OSC staff will review the disclosure five days before it is sent to shareholders to make sure the issues raised at the hearing are addressed.
Magna postponed a vote scheduled for Monday in the wake of the ruling, and has not set a date yet for a new vote. But it said it would provide the disclosure the OSC is seeking.
CPPIB and five other large investors banded together to oppose the transaction at the OSC hearing this week.
The Ontario Teachers’ Pension Plan, British Columbia Investment Management Corp., Alberta Investment Management Corp. and Montreal investment firm Letko Brosseau & Associates Inc., said Friday they will continue to oppose the transaction.
“We've won a battle here but the war is far from over,” said Peter Letko, a principal of Letko Brosseau.
The decision gives those opposing the transaction time to change the minds of those who support it, with the help of additional disclosure about all the elements of the plan, Mr. Letko said. “The key here is for shareholders to take this opportunity and think very carefully about what they're giving Frank,” he said.
Teachers is also considering its legal options, senior vice-president Wayne Kozun said Friday, but has not made a decision yet on its next move.
Mr. Kozun said Teachers supports the OSC’s calls for greater disclosure, but is disappointed the commission didn’t go further to find the deal abusive and strike it down.
Mr. Denison said CPPIB has an alternative proposal for investors to consider to reduce Mr. Stronach’s influence over the company without incurring the huge expense of buying out his shares.
He said Magna’s board of directors has a fiduciary responsibility to cancel Mr. Stronach’s lucrative consulting arrangement with the company when it comes up for renewal at the end of the year, removing him from an active role at the company and also ending the significant “transfer of wealth” that has occurred for years.
University of Toronto law professor Anita Anand, who specializes in securities law, said the OSC has “taken a very useful and strong step” in its ruling. She said it is a new direction for the OSC to order a company to disclose all information to shareholders that was given to a special committee of independent directors in cases where the committee made no recommendation on the transaction.
But Prof. Anand said it won’t be easy for shareholders to get the Ontario Superior Court to rule the deal is fundamentally unfair once it has gone through the required process of a shareholder vote.

Japan may quit whaling commission if ban stays put

FILE - In this March 12, 2010 file photo, a Metropolitan Police Department boat, foreground, escorts the Japan's government-backed research whaling vessel Shonan Maru No. 2 on the way to Harumi pier in Tokyo, carrying anti-whaling activisit Pete Bethune, captain of the Sea Shepherd vessel Ady Gil, on board shortly before Japan's coast guard arrested the New Zealander for illegally boarding the Japanese ship in February. Japan is considering withdrawing from the International Whaling Commission if no progress is made toward easing an international ban on commercial whaling, its fisheries minister said Tuesday, June 15, 2010.

Japan is considering withdrawing from the International Whaling Commission if no progress is made toward easing an international ban on commercial whaling, its fisheries minister said Tuesday.
The IWC - the international body that regulates whaling - will gather for its annual meeting next week in Agadir, Morocco. The meeting is expected to seek a compromise between pro- and anti-whaling countries, which may include allowing commercial whaling on a limited scale.
A moratorium has been in place for 25 years, but countries such as Japan, Norway and Iceland hunt whales under a variety of exceptions to the ban. An IWC proposal was circulated in April to allow limited commercial hunts for 10 years.
Japan has frequently threatened to pull out of the IWC in the past. Agriculture, Forestry and Fisheries Minister Masahiko Yamada was asked Tuesday if Tokyo would quit the IWC if progress was not made toward easing the ban on commercial whaling.
"I am considering various options," Yamada said. "This is really the final stage, and we're not sure how things are going to turn out."
The proposal to allow commercial whaling has drawn criticism from all sides and drawn fresh attention to the whaling issue. The foreign minister of New Zealand and Australia's environment minister are due to attend next week's meeting.
Yamada said he would not attend, citing budget concerns. An official from Japan's foreign ministry said its representatives to the meeting had not yet been decided.
"This is one of the most important meetings of the IWC in the last 30 years. It is my sincere hope that all member nations come to this meeting determined to break the gridlock that has been a hallmark of the Commission for so long," Australian Environment Minister Peter Garrett said in a statement.
Anti-whaling states, including Australia and New Zealand, have called a proposed whaling quota system unacceptable and demanded an end to Japan's hunt in Antarctic waters.
Japan's whaling program includes large-scale scientific expeditions to the Antarctic, while other whaling countries mostly stay along their coasts. Opponents call Japan's scientific research hunts a cover for commercial whaling.
Australia is taking Japan to the International Court of Justice in a bid to stop Japanese whaling for scientific research purposes.
Yamada's comments were the first he made to reporters since assuming his post a week ago. He was one of several Cabinet ministers appointed by new Japanese Prime Minister Naoto Kan.

Pension giants stand up to Magna

Two of Canada’s massive public pension funds are blasting a plan by Magna International Inc. to simplify its share structure and pay the Stronach family US$863-million.

Both Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan are expressing outrage at the compensation arrangement and are hoping to drawn a line in the corporate sand as a warning to other companies that might be considering similar manoeuvres.
While public pension plans have long opposed the dual class share structures which are considered detrimental to capital markets, “we believe that the premium being paid in this transaction is totally unreasonable,” said David Denison, president and chief executive of CPPIB, in a statement to the press.
That sentiment was echoed by Teachers, which also has made its disapproval public.
“We were shocked and outraged,” said Wayne Kozun, senior vice-president of public equities for Teachers’. Mr. Kozun said the deal was unprecedented both in size and in the manner in which the board has refused to make a recommendation to its shareholders.
Teachers’ owns one symbolic share of Magna in order to exercise their vote. “Owning just one share, we don’t stand to lose money, but we are worried that it will set a precedent in Canada,” he added. Mr. Kozun is hoping that by publishing their position and the rationale behind it, other investors will be swayed to vote against the deal.
“It’s turning into bit of a showdown,” said Richard LeBlanc, associate professor of corporate governance and ethics at York University in Toronto, “Magna is an incredible success story, and there has been wide latitude for past consulting payments made to Stronach, but with a premium this large, the eyebrows have been raised.”
“The [pension plans] are sending an unambiguous message to the market that this is unacceptable,” Prof. LeBlanc added.
The battle began brewing on May 6, when Magna International Inc. and the Stronach Trust announced a transaction that would eliminate the upper class of shares, which allow the Stronach family to have voting control despite owning less than 1% equity.
Under the proposal, the Stronach family would get more than 12 subordinate voting shares for each multiple voting share they own. In addition to nine million new shares they will receive, which are now worth more than $650-million, the family will also get a cash payment of US$300-million. If you distill it down to the number of multiple voting shares Mr. Stronach owns, the executive compensation payout amounts to roughly $1,200 a share, one analyst noted.
Investors, for the most part, have plugged their noses and accepted the terms of the deal. The reason: While the price tag on the surface appears high, Magna’s shares have historically traded at a 30% discount to peers primarily because of the dual-voting structure. “Shareholders have waited a long time for a proposal such as this which is also amenable to Mr. Stronach, so some would say this is a one shot deal,” said one analyst who does not wish to be identified.
For years, Canada’s pension plans have been leading a charge to eliminate dual-class share structures. A handful of companies, including MDC Partners, Home Capital Group, Sherritt International and Sceptre Investment Counsel, have converted their dual-share status to a single stock. But in seven of the eight previous deals, there was no premium paid to controlling shareholders for converting their dual shares. Sherritt International’s controlling shareholders received a 66% premium, but even that is small in relation to the 1798% premium the board is offering to pay Magna’s Class B shares, according to Teachers’ calculation.
A 2009 report, released by Toronto-based Osgoode Hall Law School, concluded that between 20%-25% of companies listed on the Toronto Stock Exchange have dual-share structures.
“From an economic development competitive perspective, dual-class shares are not conducive to strong capital markets,” says Poonam Puri, associate professor of Law at Osgoode.
“For that reason, pension funds in Canada play an extremely important role in terms of corporate governance ... and they have a number of tools at their disposal that they are willing to pull out at the right time,” she added. Their response to the Magna proposal “will make Canadian issuers, investors and regulators alike think harder about dual-class share structures,” Ms. Puri said.
At the time of the proposal, CIBC, the financial advisor to the special committee of Magna’s board of directors, did not provide a fairness opinion. In his statement, Mr. Denison “urged the board to develop a proposal to eliminate their dual-class share structure in an equitable way.”
Tracy Fuerst, Magna spokesperson, said the company had no comment on the news.

Bridge owner accuses Canada of discrimination

Matty Moroun is an American businessman who owns the Ambassador Bridge. His company has filed one NAFTA claim against Canada, and plans to file a second, over plans to build a second border crossing over the Detroit River.
 

The owner of the Ambassador Bridge between Windsor, Ont., and Detroit appears to be accusing the Canadian government of racism. The Detroit International Business Co., announced Friday it would file a claim against Canada under the North American Free Trade Agreement because Canada has offered to lend Michigan up to $550 million to help the state build its side of a new publicly owned bridge spanning the Detroit River.
The joint government project, called the Detroit River International Crossing, would see a $5-billion bridge built about five kilometres downriver from the Ambassador Bridge.
The Ambassador Bridge is owned solely by one man; billionaire U.S. businessman Matty Moroun.
"It is clear that the Canadian government is using its legislative power inappropriately to discriminate against an Arab-American businessman who has owned and operated the Ambassador Bridge for more than 30 years," said Patrick Moran, counsel for the bridge company.

Bridge owner fears loss of traffic

In a statement released Friday, the company accused Canada of influence peddling.

'It is clear that the Canadian government is using its legislative power inappropriately to discriminate against an Arab-American businessman who has owned and operated the Ambassador Bridge for more than 30 years.'— Patrick Moran, Ambassador Bridge lawyer

"The Canadian government is using its power inappropriately to coerce the Michigan Legislature into adopting legislation necessary to ensure the implementation of the [DRIC project to the detriment of necessary infrastructure projects in Canada and the U.S.," Moran said.
The company claims the only way to justify the construction of the government bridge is for the crossing to divert traffic from the three other border points in the area; the Ambassador Bridge, the Detroit-Windsor Tunnel, and the Blue Water Bridge in Sarnia, Ont.
The Ambassador Bridge is the busiest border crossing in North America, carrying more than 27 percent of the annual trade between Canada and the United States.
By offering to prop up Michigan financially to get the new project approved, "Canada is intentionally undermining a U.S. citizen's right to own and operate a business in Canada," Moran said.

2nd NAFTA claim

The NAFTA claim would be the second Moroun's company has filed against Canada in connection with the border project. On March 23, the bridge company filed a claim of arbitration under Chapter 11 of NAFTA seeking a ruling that Canada has breached its obligations under the agreement. The bridge company is looking for at least $3.5 billion in damages.
Moroun, 82, has said his grandfather's home in Windsor was torn down to build the Ambassador Bridge, which was completed in 1929.
Moroun bought the bridge on July 31, 1979.
In March, Forbes magazine listed Moroun at number 556 in its ranking of the world's richest people.
In February, Transport Canada said it has been in talks to buy the Ambassador Bridge but would not confirm Moroun's asking price or say whether a purchase offer has been made.

UN rejects Atlantic bluefin tuna ban

A chef slices high-grade fatty Atlantic bluefin tuna at a sushi restaurant in TokyoA U.S.-backed proposal to ban the export of Atlantic bluefin tuna prized in sushi was rejected Thursday by a UN wildlife meeting, with scores of developing nations joining Japan in opposing a measure they feared would devastate fishing economies.
It was a stunning setback for conservationists who had hoped the 175-nation Convention on International Trade in Endangered Species, or CITES, would give the iconic fish a lifeline. They joined the proposal's sponsor Monaco in arguing that extreme measures were necessary because the stocks have fallen by 75 per cent due to widespread overfishing.
"Let's take science and throw it out the door," said Susan Lieberman, director of international policy with the Pew Environment Group in Washington. "It's pretty irresponsible of the governments to hear the science and ignore the science. Clearly, there was pressure from the fishing interests. The fish is too valuable for its own good."
As the debate opened, Monaco painted a dire picture for a once-abundant species that roams across vast stretched of the Atlantic Ocean and can grow to as big as 680 kilograms.
It has been done in by the growing demand for raw tuna for traditional dishes such as sushi and sashimi. The bluefin variety — called "hon-maguro" in Japan — is particularly prized. A 200-kilogram Pacific bluefin tuna fetched a record 20.2 million yen ($226,000 Cdn) last year.
"This exploitation is no longer exploitation by traditional fishing people to meet regional needs," Monaco's Patrick Van Klaveren told delegates. "Industrial fishing of species is having a severe effect on numbers of this species and its capacity to recover. We are facing a real ecosystem collapse."
But it became clear that the proposal had little support. Only the United States, Norway and Kenya supported the proposal outright. The European Union asked that implementation be delayed until May 2011 to give authorities time to respond to concerns about overfishing.
Fishing nations from Africa, Asia, Latin America and the Caribbean complained any ban would damage their fishing communities and that fears of the stock's collapse were overstated. Libya, in a rambling defence of its position, went so far as to accuse Monaco of lying and trying to mislead the delegates before calling for the snap vote.

Stocks in trouble

Japan, which imports 80 per cent of Atlantic bluefin and has led the opposition to the ban, acknowledged stocks were in trouble but echoed a growing consensus at the meeting that CITES should have no role in regulating tuna and other marine species. It expressed willingness to accept lower quotas for bluefin tuna but wanted those to come from the International Commission for the Conservation of Atlantic Tunas, or ICCAT, which currently regulates the trade.
"Japan is very much concerned about the status of Atlantic bluefin tuna and Japan has been working so hard for many years to ensure recovery," Masanori Miyahara, chief counsellor of the Fisheries Agency of Japan, told delegates. "But our position is very simple. Let us do this job in ICCAT, not in CITES. This position is shared by majority of Asian nations."
Afterward, Miyahara welcomed the decision but admitted the pressure would be on his country and others who depend on the Atlantic bluefin to abide by ICCAT. It ruled in November to reduce its quota from 20,000 tonnes to 12,300 tonnes for this year. The body has also vowed to rebuild the stock by 2022, which could include closing some fisheries if necessary.
"I feel more responsibly to work for the recovery of the species," Miyahara said. "So it's kind of a heavy decision for Japan too. The commitment is much heavier than before."

Widespread mistrust?

But the European Union's Gael de Rotalier said the vote set a worrying precedent and showed there was widespread mistrust about giving CITES any role in marine issues.
That could bode ill for several other proposals still pending, including several regulating the trade in sharks and one dealing with red and pink corals. If they fail, a meeting that was expected to boost the protection of marine species would be seen by many environmentalists as a failure.
"We were expecting to have a real debate but it was not possible," de Rotalier said. "There was a strong feeling in the room against any involvement of CITES in marine issues. They were making it a matter of principle and not looking at the merits of the case."
The tuna defeat came hours after delegates rejected a U.S. proposal to ban the international sale of polar bear skins and parts, suggesting that economic interests at this meeting were trumping conservation.
The Americans argued that the sale of polar bears skins is compounding the loss of the animals' sea ice habitat due to climate change. There are projections that the bear's numbers, which are estimated at 20,000 to 25,000, could decline by two-thirds by 2050 due to habitat loss in the Arctic.
But Canada, Greenland and several indigenous communities argued the trade had little impact on the white bears' population and would adversely affect their economies.

Read more: http://www.cbc.ca/world/story/2010/03/18/tech-bluefin-tuna-ban.html#ixzz0in695t9o

Bluefin tuna trade ban gains European Union backing

Large modern tuna boats have revolutionised the industry

EU nations have decided to support a ban on international trade in Atlantic bluefin tuna until stocks recover.

The bloc has agreed to back a motion for a ban during next week's meeting of the Convention on International Trade in Endangered Species (CITES).
The US has already given its support, but Japan - where most bluefin is eaten - may opt out of CITES controls.
The EU is backing exemptions for traditional fishers, and deferring the ban for a year.
Malta was reportedly the only EU member to vote against supporting the ban proposal, which was originally lodged by Monaco last year.
Conservation groups were generally pleased.

We have long argued that this threatened species should be given the protection it urgently needs Huw Irranca-Davies, UK Marine and Natural Environment Minister

"With the two largest holders of bluefin tuna fishing quota on either side of the Atlantic - the US and EU - now supporting the trade ban, other countries should follow suit," said Sergi Tudela, head of WWF's Mediterranean fisheries campaign.
"The EU must now push for widespread support of this proposal during the CITES meeting."
UK Marine and Natural Environment Minister Huw Irranca-Davies also welcomed the move.
"We have long argued that this threatened species should be given the protection it urgently needs," he said.
Change of heart
Last year, scientists reporting to the International Commission for the Conservation of Atlantic Tunas (Iccat) - the organisation responsible for managing the fishery - said the bluefin's decline had been so stark that a trade ban was merited.
They calculated that the stock is now at about 15% of the level it was in the era before industrial fishing began.

The plight of the bluefin

Iccat's member states, however - which include EU nations with tuna fleets such as Spain, France and Italy - decided to continue fishing, but with lowered quotas.
Initially, those three countries along with Cyprus and Greece had lobbied against a CITES ban, but have now changed their positions.
Compensation packages, as yet unpublicised, have been offered to operators of the EU tuna fleet, which is now dominated by modern, industrial boats.
Conservationists are less happy with three elements of the EU proposition:

• Implementation would be delayed until 2011 rather than taking effect immediately
• If Iccat implements stronger action at its meeting next year, CITES governments could revisit the issue and choose to downgrade protection from a full ban to a system of monitoring and regulation - in CITES jargon, moving from Appendix 1 to Appendix 2 listing
• The EU wants exemptions for fishers using traditional methods, without defining what they are.

Dodging the issue
EU support alone will not secure approval for the ban within CITES, where motions need a two-thirds majority to pass.
At the last meeting, in 2007, Japan and other nations opposed to using CITES to regulate commercial fish species blocked measures aimed at safeguarding sharks.

CITES EXPLAINED Threatened organisms listed on three appendices depending on level of risk Appendix 1 - all international trade banned Appendix 2 - international trade monitored and regulated Appendix 3 - trade bans by individual governments, others asked to assist "Uplisting" - moving organism to a more protective appendix; "downlisting" - the reverse Conferences of the Parties (COPs) held every three years CITES administered by UN Environment Programme (Unep)

Japan is not opposed to bluefin conservation, but believes such matters should be regulated by regional fisheries bodies such as Iccat.
Japanese officials have blamed European governments for the bluefin's decline, arguing that governments have allocated unfeasibly large quotas to their fleets and turned a blind eye to illegal fishing.
Most bluefin is sold to Japan for use in sushi and sashimi restaurants.
Under a CITES ban, EU member states would not be allowed to export bluefin caught in their waters, and would not be able to fish in international waters.
CITES rules allow any country to lodge a "reservation" against measures it does not like, thereby opting out. Japan has indicated it may take this option if the meeting endorses a trade ban on bluefin
Conservationists and some EU states are concerned that other Iccat countries around the Mediterranean - the principal fishing ground - could also opt out of a CITES ban.
That would allow those countries to continue fishing and exporting the tuna to Japan.
The CITES meeting, in Qatar, opens this weekend.

Cobalt share offer disappoints

Cobalt sale: Price lower than expected for initial public offering

Offshore explorer Cobalt International Energy priced shares in its initial public offering below expectations, according to an underwriter.

Upstream staff Tuesday, 15 December, 2009, 23:36 GMT

The Houston-based company sold 63 million shares for $13.50 each, and raised roughly $850.5 million.

It had expected to sell shares for $15 to $17 each, according to a Reuters report.

Cobalt had no revenue as of 30 September, and no proved reserves, but plans to tap into what are some of the hottest geographies in the energy industry.

Cobalt has ownership stakes in deep-water prospects in the Gulf of Mexico and the African countries of Angola and Gabon.

Cobalt said it expects to start commercial production from its Gulf of Mexico properties between 2012 and 2014, and from its African properties between 2014 and 2016.

Cobalt International has development agreements with French giant Total and Angola's state-run Sonangol, and plans to use the IPO's net proceeds to fund its drilling and exploration programme through 2011.

Cobalt was founded in 2005 by a group of oil industry executives and private equity investors.

Its chief executive, Joseph Bryan, had previously been chief operating officer of oil and gas explorer Unocal.

The funds backing the company are affiliated with Goldman Sachs & Company, and private equity firms Riverstone Holdings and The Carlyle Group.

Another oil and gas prospector, Crimson Exploration, is expected to price later this week.

Cobalt's underwriters are led by Credit Suisse and Goldman Sachs & Company.

The underwriters have the option to purchase an additional 9.45 million shares

GM remains intent on reaching a deal with one of the two remaining bidders.

GM remains intent on reaching a deal with one of the two remaining bidders.

General Motors Co has no intention of reopening the sale process for its European Opel operations and remains intent on reaching a deal with one of the two remaining bidders as quickly as possible.

GM Chief Financial Officer Ray Young said the automaker was looking to wrap up the Opel sale as quickly as possible even after improvements in its own financial position removed the immediate threat of bankruptcy for Opel.

"I think everyone is anxious to get this thing done," Young said on the sidelines of a GM event at its vehicle testing facility outside Detroit.

Canadian auto parts group Magna International is locked in a two-way competition with Belgium-based investor RHJ International to buy Opel in negotiations that have also involved the German government.

Berlin has thrown its support behind Magna's offer, which is backed by Russia's Sberbank, on the grounds that it offers better protection for the 25,000 jobs on Opel's payroll in Germany.

GM has expressed reservations about the Magna deal, saying it wants to make sure that its proprietary technology in Opel is protected in any partnership. Talks between GM and Magna last week failed to produce a deal for Opel.

GM Chief Executive Fritz Henderson told Reuters Television in an interview on Tuesday that he did not expect to reopen the Opel sale to any party beyond Magna and RHJ.

Battered Magna expects rebound

Auto-parts maker says markets should improve with ‘cash for clunkers'

Car-parts maker Magna International Inc (MG.A-T53.301.923.74%) ., hit by the suffering North American auto market, sees “signs of improvement” for the balance of the year, co-chief executive officer Don Walker said Friday.

On a conference call with analyst, Mr. Walker said the United States' new vehicle incentive program – known as “cash for clunkers” – is helping stabilize sales there, and European sales are on the rise.

But a 49-per-cent decline in vehicle production in North America in the second quarter pushed Magna's revenue down by 45 per cent to $3.71-billion (U.S.) from $6.71-billion in the year-earlier quarter, and the company declared a loss of $205-million.

Among the bright spots, Magna is winning business from other companies, and is expecting to gain significant growth in the coming years by expanding its production of electronic parts, and components for electric cars and hybrids.

The company was tight-lipped about its bid for a stake in Adam Opel GmbH, the European operations of General Motors Corp. Discussions are under way between GM and the two bidders – Magna and its Russian partner, and Belgium-based investment firm RHJ International.

If the consortium is successful in completing the acquisition, Magna will put in place appropriate “firewalls” to ensure its current business will operate independently from Opel, Mr. Walker said, so its other European customers are comfortable with the arrangement.

“We've have various initial feedback” from existing customers, Mr. Walker said. “People are waiting to see, number one, [if] this deal happens, and number two, how do we put the firewalls in place?”

The key is to make sure that there is no risk of technology transferring “from other customers to Opel or from Opel to other customers,” he said.

Mr. Walker's only other comment on the deal was that, if it takes place, there could be “growth into Russia” to drive new sales, and a focus on cost reductions.

RHJ head says Opel sale not foregone conclusion

FRANKFURT (Reuters) - The outcome of the bidding process for GM's German unit Opel is not a foregone conclusion despite widespread backing for rival bidder Magna, the head of RHJ International (RHJI.BR) said in a newspaper interview.

RHJ still has good chances of winning the prolonged bidding process for the General Motor's GM.UL unit, Chief Executive Leonhard Fischer told the Handelsblatt newspaper in an interview to be published on Monday.

Fischer's comments come after GM chief Fritz Henderson and Magna (MGa.TO) Co-CEO Siegfried Wolf met on Friday evening in an attempt to jumpstart a stalled bidding process.

Fischer, however, warned against jumping to hasty conclusions and added that it did not benefit the German government to "ban competition from the bidding process."

"Predeterminations in preference of a specific investor only make the already complex sales negotiations more formidable," he told the newspaper.

He said talks were not necessary between GM and RHJ at the moment as the two companies had already negotiated a basic contract.

Both government officials and labor unions have expressed their preference for Magna and have prodded GM to work toward an agreement.

Magna wants to expand Opel's full-scale car assembly business and forecasts high growth rates.

GM's chief negotiator has praised RHJ's offer, but Berlin rejected its first offer for Opel in May and the private equity firm has been unable to undermine widespread backing in Germany for Magna, even after dropping plans to close two German plants.

AIG, CIT shares soar amid broad financial rally

NEW YORK (Reuters) - Shares of battered financial companies including insurer American International Group Inc (AIG.N) and lender CIT Group (CIT.N) soared on Wednesday, as investors rushed to buy shares to cover short positions in the companies.

AIG shares closed up 62.7 percent on the New York Stock Exchange, ahead of its quarterly earnings report due on Friday and as a new chief executive prepares to take up his position on Monday.

CIT shares climbed as much as 55 percent to an Intraday high of $1.56 from a close of $1.01 on Tuesday. The lender to small and medium-sized companies has been battling losses and recently secured a $3 loan facility from bondholders. The stock closed at $1.39.

"It seems like the short sellers were hoping that these financial institutions would show some signs of insolvency," said Joseph Cusick, senior market analyst at online brokerage optionsXpress in Chicago.

"Over the last couple of days we have seen money flow into these stocks because of the perception of their cheap valuation ... now we are seeing shorts being squeezed and potentially covering their positions," he said.

Shares in mortgage finance companies Fannie Mae (FNM.N) and Freddie Mac (FRE.N) also climbed on Wednesday, Cusick noted. Fannie shares closed up 29.8 percent at 74 cents, while Freddie shares were up 31 percent at 80 cents.

Shares in Ambac Financial (ABK.N), another company that has been hurt by losses, soared to close up 34 percent at $1.22.

Dick Bove, a bank analyst with Rochdale Securities, said AIG and CIT Group were also benefiting from a growing appetite for risk.

"Money is now pouring into the junk bonds, the high grades, commercial paper and everything financial," Bove said.

The broader KBW Banks index .BKX rose 3.54 percent.

EYEING AIG

Shares in AIG rose as analysts forecast operating earnings could stabilize after five-straight quarterly losses. Analysts have predicted it could benefit from unrealized investment gains, partly reversing write-downs in earlier quarters.

There was also optimism surrounding appointment of new CEO Robert Benmosche, who next Monday will become the fourth person in the last 14 months to assume the insurer's leadership.

"With the potential of good news looming in AIG, investors who are short AIG are being forced to cover their positions today. That has created a short-covering rally," said William Lefkowitz, options strategist at brokerage firm vFinance Investments.

In all, option traders had exchanged about 380,000 contracts in AIG, five times the average daily volume, according to option analytics firm Trade Alert. The turnover was dominated by 228,000 calls, which grant investors the right to buy AIG shares at a fixed price and time.

AIG is seen on average reporting second-quarter operating earnings of $1.31 a share, according to a Reuters poll of analysts.

(Reporting by Lilla Zuill; Additional reporting by Doris Frankel in Chicago, Elinor Comlay and Steve Eder in New York; Editing by Andre Grenon, Gerald E. McCormick and Bernard Orr

U.S. Retailers Report Sluggish July Sales

Sheika Smith, 26, of the Bronx, applies eye make up at the Sephora counter of the new JC Penney store in the Manhattan Mall during the grand opening in New York on July 31, 2009. Retailers are reporting sluggish sales for July as shoppers' worries about jobs escalate, raising concern about the health of the back-to-school shopping season. (AP Photo/Mary Altaffer)

Concern Raised for Back-To-School-Season

(AP) Shoppers - worried about job security and finding fewer options among the sales bins - remained tight-fisted in July, resulting in sluggish sales for many merchants and raising concern about the back-to-school shopping season's health.

As merchants reported their sales figures Thursday, mall-based chains continue to be hit hardest as consumers focus on necessities. Among the big disappointments were Stage Stores Inc. and teen retailer Wet Seal Inc. Warehouse club operator Costco Wholesale Corp.'s results also came in slightly below analysts' estimates.

"The consumer is stressed and depressed," said Ken Perkins, president of retail consulting firm Retail Metrics. "Back-to-school shopping season is going to be very late." He added that the big concern among Americans is job security.

A number of special factors also depressed July's sales results. Lean inventories left fewer clearance options for bargain hunters, as stores wanted to protect themselves from getting stuck with piles of leftovers. The shift of the sales-tax holidays from July to August in most of the 14 states that have them because of a late Labor Day weekend also stole momentum from July.

Perkins and other analysts have also noted that the uptick in car buying spurred by the government's "cash for clunkers" program might siphon sales from other categories like clothing and home furnishings. That could hurt back-to-school shopping as consumers shift available cash to car payments.

Costco reported that its same-store sales dropped 7 percent in July, pressured by lower gas prices and the stronger dollar. Analysts polled by Thomson Reuters expected a slightly smaller decline of 6.7 percent in same-store sales or sales at stores opened at least a year. Same-store sales are considered a key indicator of a retailers' health.

Among mall-based apparel retailers, Wet Seal reported a 12.1 percent drop, worse than the 10 percent decline that analysts had expected.

Department-store operator Stage Stores posted an 11.9 percent drop, bigger than the 8 percent decline that analysts had anticipated.

Limited Brands Inc., which operates Victoria's Secret and Bath and Body Works, said same-store sales fell 7 percent. That was better than the 12.4 percent drop that analysts had expected.

GM, Germany, bidders hold new Opel talks

ARCHIV - Ein Logo von Opel ist am 23. Maerz 2009 vor einem wolkenverhangenen Himmel bei einem Opel-Haendler in Oberursel bei Frankfurt am Main zu sehen. Der Nervenkrieg um Opel spitzt sich zu: Begleitet von politischem Druck aus Deutschland sollte der Verwaltungsrat des US-Konzerns General Motors ab Montag, 3. August 2009, in Detroit ueber das Schicksal des deutschen Autobauers beraten. Am Dienstag wollen die beteiligten Unternehmen mit Vertretern von Bund und Laendern in Berlin einen Ausweg aus der verzwickten Lage suchen. (AP Photo/Michael Probst) --- FILE - An Opel logo is seen at an Opel car dealer in Oberursel, central Germany, March 23, 2009. (AP Photo/Michael Probst) (Michael Probst - AP)

BERLIN -- Talks between General Motors Co., the German government and two bidders seeking to buy GM's European Opel unit ended Tuesday with progress reported and GM saying it hopes to make a recommendation shortly on a buyer.

"Progress was made clarifying issues from the best and final offers received two weeks ago," GM said in a statement, without saying exactly when it would make a recommendation to the Adam Opel GmbH Trust board.

Earlier Tuesday, GM's chief negotiator said a decision on a buyer wasn't imminent.

GM's John Smith said he hoped the meeting at the Economy Ministry in Berlin "further clarifies the issues from the best and final offers received two weeks ago."

The two potential suitors for Opel are a consortium of Canadian car parts maker Magna International Inc. and Russian lender Sberbank; and Brussels-based investor RHJ International SA.

GM said its new board of directors was updated on efforts to sell Opel when it held its first meeting on Monday, but received no recommendation on a buyer, given that talks with the bidders are ongoing.

Asked about his expectations of Tuesday's meeting, Smith replied: "If you're asking, do I expect to select one bidder? No."

"Obviously we at GM will need to go back and take everything we've learned from today's proceedings, consider it internally and get to a position on making a recommendation," Smith told reporters.

He would not comment on what points GM felt it still needed to clarify, saying only that he wanted to see "a positive resolution for Opel."

On Monday, German government spokesman Klaus Vater said Berlin sees "encouraging" signs of progress in the negotiations, but did not elaborate.

The government has made clear that it prefers the bid from Magna and stressed that GM needs to take its views into account in deciding on a buyer, because it is offering financial help to make a deal possible.

The talks also are of interest to other European countries, including Britain, where Opel sister brand Vauxhall is based; and Belgium, Spain and Poland, where Opel has operations.

Under a structure created earlier this year to keep Ruesselsheim, Germany-based Opel out of GM's filing for bankruptcy protection, 65 percent of Opel has been formally under the care of a trustee since the beginning of June, with GM holding the remaining 35 percent.

Smith last week wrote that the Magna bid as submitted "contained elements around intellectual property and our Russian operations that simply could not be implemented." He said discussions were ongoing to resolve that.

RHJI's bid "would represent a much simpler structure and would be easier to implement," Smith wrote.

---

AP Auto Writer Tom Krisher in Detroit contributed to this report.

Opel suitors must improve bids - Germany

BERLIN (Reuters) - The two suitors for GM's German unit Opel must improve their bids to win government backing, German Economy Minister Karl-Theodor zu Guttenberg said on Sunday before a Monday GM board meeting likely to focus on Opel. Canadian auto parts maker Magna is battling with RHJ International for control of Opel, in which GM is relinquishing control in return for state support the carmaker needed after filing for bankruptcy protection in June.

BERLIN (Reuters) - The two suitors for GM's German unit Opel must improve their bids to win government backing, German Economy Minister Karl-Theodor zu Guttenberg said on Sunday before a Monday GM board meeting likely to focus on Opel.

Canadian auto parts maker Magna is battling with RHJ International for control of Opel, in which GM is relinquishing control in return for state support the carmaker needed after filing for bankruptcy protection in June.

The German states and federal government have expressed a preference for Magna's bid while sources close to the talks have said GM likes RHJ. Several regional German leaders reaffirmed their backing for Magna at the weekend.

"My concerns are well known," Guttenberg told Bild am Sonntag newspaper on Sunday.

"In the tri-lateral talks with GM, the investors as well as the federal and local German governments, it'll be important to get further improvements that are in taxpayer's interest."

Guttenberg added: "One such improvement could be, for instance, an increase in the investors' capital contribution."

GM's board meets on Monday and industry sources said Opel would likely be discussed. Negotiations between Magna and GM had recently stalled but the their positions have since come closer, said one person familiar with the situation.

Foreign Minister Frank-Walter Steinmeier telephoned GM's chief executive to underscore Germany's expectations for the sale of Opel, a newspaper reported on Saturday.

Without citing sources, mass-circulation newspaper Bild said Steinmeier phoned GM's Fritz Henderson on Friday to say that government financial guarantees would only be available for an investor that was long-term and that would secure jobs.

Steinmeier is also vice chancellor in Chancellor Angela Merkel's grand coalition. The Social Democrat is running against conservative Merkel in the September 27 election.

Magna wants to expand Opel's full-scale car assembly business and forecasts high growth rates, particularly in Russia, home of its bidding partner, 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.

"The only plan that offers a perspective for the Opel plants in Germany is Magna's," said Dieter Althaus, state premier of Thuringia where one Opel plant is based. He urged Merkel to use her influence with U.S. President Barack Obama for Magna.

Hesse state premier Roland Koch, where Opel's headquarters is based, told the WirtschaftsWoche magazine there would be no German taxpayer money available for RHJ.

Germany has worked hard to make it clear to GM "that there would be no consensus for the financing of an RHJ takeover."

Magna's bid for Opel preferred

The German government still prefers the bid of Canadian auto parts firm Magna to take over struggling General Motors subsidiary Opel (left). -- PHOTO: REUTERS

BERLIN - THE German government still prefers the bid of Canadian auto parts firm Magna to take over struggling General Motors subsidiary Opel, a spokesman said on Wednesday, following an initial assessment.

Berlin had already expressed a preference for Magna's bid, backed by Russian bank Sberbank, before receiving other offers from Belgium-based investment group RHJ International and Chinese company BAIC, spokesman Ulrich Wilhelm told a regular briefing.

'This assessment ... has been confirmed following our examination (of the bids),' he added, following a meeting of the government's 'Opel task force' with GM executives,.

While the final decision lies with GM, the German government is involved as it is set to stump up billions of euros in loan guarantees to sweeten any takeover deal in a bid to save tens of thousands of jobs.

Berlin and GM 'want to come to a joint assessment in the coming weeks,' with the hope of wrapping up the already lengthy saga in the next few months, he said.

'You know that the federal government is not the seller. At the end of the day, we can only decide about the loans and loan guarantees. The seller is GM. Conversely, a sale can only occur in a sustainable fashion after the governments in Europe assure these loans and guarantees,' he added.

In late May, the German government agreed to support with cheap loans and loan guarantees a bid for a majority stake in Opel by Magna, which besides Sberbank has also teamed up with Russian automaker GAZ.

Magna and Sberbank will each purchase a stake of 27.5 per cent. Previously Magna had only declared itself ready to acquire a 20 per cent stake. They still seek 4.5 billion euros (S$9.2 billion) in state guarantees.

Russian business daily Kommersant reported on Monday that Magna would also demand that GM include intellectual property rights as part of any Opel deal. For their part, RHJ International is seeking 700 million euros less in state guarantees than Magna and would buy a 50.1 percent stake for 275 million euros.

RHJ International is thought to be planning around 8,100 job losses Europe-wide in the Opel business. The German government said in May that Magna's plan involved around 2,600 jobs shed in Germany, with a further 8,500 elsewhere in Europe. BAIC's preliminary offer is valued at 660 million euros and it has asked for 2.64 billion euros in German government guarantees. -- AFP