DETROIT (AP) — General Motors Co. said Tuesday it will keep its European Opel unit and restructure it instead of selling a 55 percent stake to Canadian auto parts maker Magna International and its partner, Russian lender Sberbank. GM’s board of directors made the decision at a daylong meeting after determining that a 3 billion […]
DETROIT (AP) — General Motors Co. said Tuesday it will keep its European Opel unit and restructure it instead of selling a 55 percent stake to Canadian auto parts maker Magna International and its partner, Russian lender Sberbank.
GM’s board of directors made the decision at a daylong meeting after determining that a 3 billion euros ($4.43 billion) restructuring plan was significantly lower than what GM would have had to contribute to other bidders for the division. GM CEO Fritz Henderson added that Europe’s business environment and GM’s overall health have both improved since it put the division up for sale.
The decision ends a year of uncertainty for the troubled Opel brand and its English sister, Vauxhall. Henderson said in a statement that GM will present its restructuring plan to the German government soon.
Ulrich Wilhelm, spokesman for Chancellor Angela Merkel said the German government “regrets the decision” by GM’s board.
“With this decision, an investor process has been broken off which was conducted intensively by all those involved, including GM, over a period of more than six months,” Wilhelm said in a statement. Germany now expects GM to strengthen Opel and to pay back the euro1.5 billion in bridge credit granted early this year, he added.
In a brief statement, Magna co-CEO Siegfried Wolf said his company would continue to support Opel and GM in the future.
“We understand that the board concluded that it was in GM’s best interests to retain Opel, which plays an important role within GM’s global organization,” he said.
A spokeswoman for the Obama administration said the government was not involved in GM’s decision to keep Opel.
The move came even though Opel’s unions on Tuesday reached agreement with Magna for 265 million euros ($390 million) a year in cost cuts. Henderson said it will work with Europe’s unions “to develop a plan for meaningful contributions to Opel’s restructuring.”
GM, which has lost more than $80 billion in the last four years and has received about $50 billion in aid from the U.S. government, had announced plans to sell Opel in order to focus on more profitable regions, including Latin America and Asia.
But the potential sale had been fraught with complications. In August, GM rejected a deal to sell Opel to Magna because it preferred Brussels-based investor RHJ International SA.
The offer from RHJ International required less government aid but appeared likely to involve more job cuts in Germany, something the German government had been keen to avoid as it headed into elections in September.
After Germany agreed to provide some euro4.5 billion ($6.6 billion) in financial aid for the Magna deal in September, GM announced it would sell Opel to the Magna consortium. But the deal was still set to face European Union scrutiny.
Last month, the EU set a deadline for Nov. 27 to decide whether the Magna and Sberbank takeover could cause competition problems. The EU also was considering examining German government subsidies to Opel. Germany hadn’t formally asked for EU approval to give the euro4.5 billion to Opel’s new buyers.
Other concerns remain. Workers have said they would rescind the pay concessions announced Monday if there is any outcome besides a deal with Magna. That could leave GM at significant financial risk. Magna had said it planned to cut about 10,500 Opel jobs in Europe, with 4,500 in Germany, but that it would keep four German plants open.
The governor of the German state of Hesse, where Opel’s Ruesselsheim headquarters is located, reacted angrily to the decision.
“I am very shocked and at the same time angry that the months-long efforts to find as good a solution as possible for Opel Europe have failed because of GM,” said Roland Koch, a deputy leader of Merkel’s party, the Christian Democratic Union. “In view of the negative experiences of recent years with GM’s business policy I am greatly concerned about the future of the company and its jobs.”
Also Tuesday, Henderson said GM planned to resume work directly with Russian automaker GAZ on modernizing its operations and other projects. GM had been concerned that Magna would give some of its future auto designs to GAZ, which competes with Chevrolet.
GM Europe employs 54,000 workers in total and sells Opel and Vauxhall cars as well as Cadillac and Chevrolet. GM Europe reported a pretax loss of $1.6 billion in 2008, compared with a profit of $55 million the year before.
GM Europe has the fourth-highest auto sales in Europe, after VW Group, PSA Group and Ford Motor Co., according to the European Automobile Manufacturers’ Association. European sales had fallen 6.6 percent through September, but sales of Opel and Vauxhall cars have fallen even further, with a drop of 11.4 percent.
Under a structure created earlier this year to keep Opel out of GM’s filing for bankruptcy protection, 65 percent of Opel has been formally under the care of a trust since the beginning of June, with GM holding the remaining 35 percent.
The trust said in a statement late Tuesday that it “takes note of the decision.” It said the GM’s board’s decision did not require the trust’s approval.
“I hope, also in the interests of Opel employees, that this decision helps Opel to new economic stability,” said the trust’s head, Fred Irwin.