General Motors cancels Opel sale

[P & CA News Bot]

General Motors announces that it has cancelled plans to sell Opel and Vauxhall to Canadian car parts firm Magna.

More...

[Francois Cellier]

... and here is the full article from BBC News

General Motors cancels Opel sale

Page last updated at 01:34 GMT, Wednesday, 4 November 2009


General Motors (GM) has cancelled plans to sell a majority stake in its European car business Opel, including its UK brand Vauxhall.

The US giant said in a statement that its board had made the decision because of "an improving business environment for GM over the past few months".

GM had agreed to sell Opel and Vauxhall to Canadian car parts firm Magna.

It added that it would now be seeking aid for Opel from the German government and other European states.

GM added that it had also come to its decision because of the importance of Opel and Vauxhall to its global strategy.

It said it would now "initiate a restructuring of its European operations in earnest".

However, its decision is likely to cause much anger in Europe, where the planned sale of Opel has been dragging on for months, and the German government had pledged Magna 4.5bn euros ($6.7bn; £4bn) of loans.

Government spokesman Ulrich Wilhelm said Berlin regretted the decision, adding that it wanted GM to repay 1.5bn euros in bridge financing extended by German banks.

Magna said in a brief statement that it would continue to support Opel and GM in the future.


Changed fortunes

GM first said in March that it wished to offload Opel and Vauxhall, before finally agreeing to sell to Magna in September.

The US giant's decision to sell its main European business was made after it was forced to announce a group-wide loss of $30.9bn for 2008, after its sales plummeted in the global recession.

However, aided by financial support from the US government, and a brief period in US bankruptcy protection in June and July of this year, GM has since managed to turn around its fortunes.

Earlier on Tuesday it said its US sales had risen in September for the first time in almost two years.

It is in this context that it now wishes to hold onto Opel and Vauxhall.

Car analysts said they were not too surprised by GM's announcement.

"GM never really wanted to get rid of Opel, they were being forced into it because of their financial situation," said Aaron Bragman of IHS Global Insight.

"A lot of GM cars have come out of Opel's engineering, so Opel provides a very useful service for GM globally.

"Maintaining that foothold there is something that is beneficial for GM in the long run."


GM's decision?

However, the German media is already questioning how easy it will be for GM to simply cancel the sale agreement.

This is because when GM went into administration, ownership of Opel and Vauxhall was transferred to a trust, headed by two representatives of GM, two from the German government and one independent panel member.

German newspapers has speculated whether it is this trust and not GM that will have to make the final decision.

Opel employs a total of 54,000 workers across Europe, with 25,000 based in Germany.

In the UK its Vauxhall brand employs 5,500 people across two plants in Luton and Ellesmere Port.

Unite, the main union at Vauxhall, last month reached a deal with Magna to limit job cuts at the two factories to just 600 people, and all through voluntary redundancy.

Tony Woodley, secretary general of Unite, told the BBC that GM's news was an "incredible turnaround".

"The decision is in my view a fantastic decision and the right decision for General Motors themselves," he said.

"There's no logic in breaking up the company. I believe it is the right decision in spite of a good deal that we'd struck with Magna."

Mr Woodley added that there would now be negotiations with GM bosses over plans to restructure the company.

The decision to sell Opel to Magna had been controversial because of the German government's offer of the 4.5bn euro loans.

The European Commission warned last month that Berlin's offer of this aid may breach European competition rules because there were "significant indications" the German government had only been offering the money if Magna's bid was successful, and not that of rival suitor, Belgian investment fund RHJ.

The German government immediately denied any wrongdoing.

[Underhill]

I didn't understand why GM was taking that course in the first place. It seems having a division under their roof who specializes in small, fuel efficient cars makes sense for their long term success.

[Sir Digalot]

i never understood any of the manufactuers possibly with the exception of chrysler who never really had a huge european market in the first place, but ford and GM have been successfully making small cars for years in europe.

maybe they beleive americans do not want them because of all the hype surrounding how unsafe they are.

10 years ago i would have put my brand new supermini up against many of the cars rolling on american roads.

i hate out here however that they insist on an autobox for a small car... if it is small ( 2.0 or less ) give me a manual trans anyday

[Underhill]

Originally Posted by Sir Digalot

i never understood any of the manufactuers possibly with the exception of chrysler who never really had a huge european market in the first place, but ford and GM have been successfully making small cars for years in europe.

maybe they beleive americans do not want them because of all the hype surrounding how unsafe they are.

10 years ago i would have put my brand new supermini up against many of the cars rolling on american roads.

i hate out here however that they insist on an autobox for a small car... if it is small ( 2.0 or less ) give me a manual trans anyday

They have it in their heads we don't buy small cars. We don't, but it's only because they've never offered us anything worth 2 cents. I mean look at their last attempts, the Omni's and Chevettes... garbage. The last good hatchback we had was the VW's of the 80's- early 90's. And surprise, surprise... they sold like hotcakes.

Even the exception to the rule they managed to muck up. Ford had a good thing in the Focus, good reviews etc... but when they came out with a redesign they only offered it only in Europe for 4 years (an eternity). We were stuck with the old one and of course it became a dinosaur. Even honda and toyota are guilty of turning their hatchbacks sold in the rest of the world into de-tuned dogs with trunks tacked onto the back.