GM board decides to keep European Opel unit

The sale to Canadian auto parts maker Magna International and its partner, Russian lender Sberbank is off. With bankruptcy now behind it, General Motors now feels confident it can proceed with Opel under the GM umbrella.

From the GM press release:

Given an improving business environment for GM over the past few months, and the importance of Opel//Vauxhall to GM’s global strategy, the GM Board of Directors has decided to retain Opel and will initiate a restructuring of its European operations in earnest.

“GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable consideration,” said Fritz Henderson, president and CEO. “We understand the complexity and length of this 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, employee, 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.”

On a preliminary basis, the GM plan entails total restructuring expenses of about € 3 billion, significantly lower than all bids submitted as part of the investor solicitation. GM will work with all European labor unions to develop a plan for meaningful contributions to Opel’s restructuring. While Opel continues to outperform against its viability plan assumptions and immediate liquidity is stable, time is of the essence.

“While strained, the business environment in Europe has improved.” Henderson said. “At the same time, GM’s overall financial health and stability have improved significantly over the past few months, giving us confidence that the European business can be successfully restructured. We are grateful for the hard work of the German and other EU governments in navigating this difficult economic period. We’re also appreciative of the effort put forward by Magna and its partners in Russia in trying to reach an equitable agreement.”

I will be speaking about this issue in an hour’s time on the BBC. But, look at this as a result of economic reflation. GM has exited bankruptcy and feels confident enough of the future path of the economy to keep Opel instead of having to sell in a fire sale. 

The Germans are livid, according to the Wall Street Journal.

The governor of the German state of Hesse, where General Motors Co.’s Opel unit is headquartered, said Wednesday he is "concerned and at the same time annoyed that the months-long efforts to find a good solution for Opel have failed because of GM."

In a statement, Roland Koch, a confidant of German chancellor Angela Merkel, said that considering the "negative experience in recent years with GM’s corporate policy, I’m worried a lot about the future of (Opel) and its staff."

In a surprise move, GM’s board late Tuesday decided it wants to retain its core European operations after talks over a possible sale have been dragging on for months.

Koch said he expects GM to repay by Nov. 30 the bridge financing provided by the German state "so that the German tax payer doesn’t get harmed."

Remember that other EU countries came out of the woodwork saying, in effect, that the Germans had bought off GM and were being advantaged by unfair subsidies while in places like Belgium and Spain workers were suffering.

Very interesting. More after the BBC show!