The board of directors of General Motors Company has voted to retain ownership of its Opel division instead of going through with the sale to Magna International, Inc. of Canada and its partner, Sberbank of Russia.
The board said its decision to derail that deal was base, in part, on positive signs in the European economic climate and GM’s much improved financial health and stability. In a prepared statement, GM’s CEO Fritz Henderson said these factors have given the automaker confidence that Opel can be “successfully restructured.”
Since emerging from bankruptcy this past summer, GM is not prohibited from investing a portion of the $50 billion taxpayer funded relief package on overseas operations like Opel. Henderson said, “We understand the complexity and length of the issue has been draining for all involved. However, from the outset, our goal has been to secure the best long-term solution for our customers, employees, suppliers and dealers, which is reflected in the decision reached today. This was deemed to be the most stable and least costly approach for securing Opel/Vauxhall’s long-term future.”
GM plans to offer a restructuring plan to officials in German Chancellor Angela Merkel’s administration as well as officials of other affected European Union countries soon. That restructuring plan may well include about a 30% reduction in structural cost and the elimination of up to 10,000 jobs.
GM has been involved in negotiations with Magna International, Inc. and their financial partner, Sberbank since early this year. Under the terms of the agreement the parties had agreed to, Magna and Sberbank would each have received a 27.5% stake in Opel. GM would have retained a 35% stake and Opel employees would have been granted a 10% stake in the German automaker.
For months, other suitors have waited in the wings on the chance that the Magna / Sberbank deal would fall apart. That deal became bogged down in recent months over concerns expressed by the European Union commissioner that GM’s selection of bidders may have been unduly influenced by the German government’s offer of financial assistance in return for assurances that the new owners would not cut jobs at Opel factories located in Germany.
Other bidders included RHJ International, a Belgium-based industrial holding company, Beijing Automotive Industry Corporation and Fiat SpA, which took control of Chrysler Group this past summer.
Now that the Magna / Sberbank deal has been abandoned, GM plans to invest about $4.4 billion toward restructuring Opel – an amount that pales in comparison to the investments planned by Magna / Sberbank and every other bidder for the company.
GM said that it intends to work with European labor unions and is hopeful that they will make “meaningful contributions to Opel’s restructuring.”