GM Changes Mind on Magna Deal, Will Keep Opel
After seven months of sensitive negotiations with numerous parties from government officials in Germany and other European Union countries to a host of labor unions and financial organizations, General Motors has decided to kill the nearly-completed deal to sell 55 percent of its Opel/Vauxhall holdings to Magna International and the Russian-based Sberbank operation, which also has ties to domestic automaker GAZ. This stunning turn of events came about when the board of directors of the New GM voted to reject the original deal that had been formulated during the automaker's recent bankruptcy period and decided that under the current improving economic circumstances, it would be better served by retaining Opel and undertaking a wide-ranging internal restructuring of its entire European operation. GM expects this process to cost about 3 billion euros ($4.43 billion), an amount it says is still significantly below all other bids submitted as part of the investor solicitations. Whatever else may transpire in the wake of any reorganization efforts, there will be one very tangible benefit: By keeping Opel in house, GM can effectively ensure the security of all critical intellectual design and property rights generated by the group that has long been the heart of and soul of its worldwide vehicle engineering programs.
In a formal statement, president and CEO Fritz Henderson said that fundamental improvements to both Europe's and GM's financial health and stability during the past several months were key drivers in this abrupt turnabout. He also indicated that GM hoped to expand its already significant presence in Russia and work directly with GAZ to "contribute to both the modernization of its operations and the joint development of the Russian vehicle market on a mutually attractive basis." Henderson went on to note that GM will soon present its new restructuring plan to various EU governments and hopes to receive "favorable consideration." He said the automaker will work with all European labor unions to develop a plan for meaningful contributions to Opel's restructuring, but that time is "of the essence" in achieving that goal.
Aspirations aside, the most difficult challenge to GM's unexpected U-turn will no doubt involve satisfying various governmental, financial and labor stakeholders in Germany, home of Adam Opel AG and the country where the greatest potential for permanent layoffs and plant closings exists. In the end, Henderson emphasized the decision reflected GM's ultimate goal from the very beginning: "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."