GM calls off sale, keeps Opel

Board cites business climate in Europe, GM's financial health

Robert Snell / The Detroit News

General Motors Co.'s board of directors Tuesday voted to keep its German carmaker, Adam Opel GmbH, instead of selling it to Canada's Magna International Inc. and its Russian partner, Sberbank.

The board based its decision, in part, on an improved business environment in Europe and GM's overall financial health and stability since emerging from bankruptcy court after receiving about $50 billion in federal aid.

Those two factors gave GM confidence "that the European business can be successfully restructured," President and CEO Fritz Henderson said.

Opel and its British Vauxhall operations are key parts of GM's global product development system and account for the bulk of GM sales in Europe.

Since emerging from bankruptcy July 10, GM has not been barred from spending some of its federal aid on its overseas units.

"We understand the complexity and length of this issue has been draining for all involved," Henderson said. "However, from the outset, our goal has been to secure the best long-term solution for our customers, employees, suppliers and dealers. ... This was deemed to be the most stable and least costly approach for securing Opel/Vauxhall's long-term future."

GM will submit a restructuring plan soon to Germany and other governments that could involve cutting about 10,000 jobs and slashing structural costs by about 30 percent.

The German government has provided $2.1 billion in emergency aid and had agreed to provide more than $6 billion in loan guarantees for a deal.

German officials had said the money wasn't contingent on any specific deal, but they seemed to express a strong preference for a sale to Magna.

The board's decision blocks the potential spread of Opel technology to competing manufacturers and allows GM to maintain control over vehicle platforms shared by several of its models, said Michael Robinet, vice president at CSM Worldwide in Northville.

"The bad news is GM keeps Europe. It needs a lot of attention and resources -- resources that are not plentiful at General Motors," Robinet said.

The decision will divert some of GM's focus away from Asian and North American operations.

GM's decision is bound to provoke outrage in Europe, where the U.S. automaker has been seen as dragging out the negotiation process. Tuesday's vote ends a protracted negotiation that started earlier this year.

But Tony Woodley, general secretary of the Unite U.K. union told the British Broadcasting Corp. that GM's decision is the right one, according to the Bloomberg news service, adding it is preferable to a deal with Magna/Sberbank.

Under the deal with Magna and Sberbank, they would each have gotten a 27.5 percent stake in Opel, based in Ruesselsheim. GM would have kept 35 percent, and employees would have received 10 percent.

Previous bidders and interested parties included Fiat SpA, Belgium-based industrial holding company RHJ International and Beijing Automotive Industry Corp.

The deal was thrown into question recently when a European Union commissioner raised concerns that GM's choice of bidder may have been limited by the German government's apparent decision to offer financial aid only if Opel was sold to Magna and Sberbank.

Now that the deal has been rejected, GM plans to incur about $4.4 billion in restructuring expenses, which is much less than amounts proposed by all Opel bidders, GM said Tuesday.