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You are here: Home News Community News GM axes Opel sale, reclaims small-car jewel

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05/11/2009GM axes Opel sale, reclaims small-car jewel

While some German auto analysts claimed the decision was logical from an industrial viewpoint, many politicians and unions in Germany were furious at the surprise decision.

Frankfurt -- General Motors has brought the sale of its European car division Opel/Vauxhall to a screeching halt, fuelling fear and anger in Germany Wednesday as the US group reset its global auto strategy.

Some German auto analysts felt the decision was logical from an industrial viewpoint but politicians and unions were furious.

Economy Minister Rainer Bruederle slammed GM's ditching of a deal with the Canadian auto parts group Magna and Russian Sberbank as "totally unacceptable."

British authorities said however that they would work with the US auto giant to secure the future of British plants that make Opel's sister brand Vauxhall.

GM, which was struggling with bankruptcy, had initially agreed to sell a 55-percent stake in Opel/Vauxhall to Magna and Sberbank.

GM Europe employs about 55,000 workers in Germany, Britain, Spain, Belgium, Poland and Austria.

But now, the GM board "has decided to retain Opel and will initiate a restructuring of its European operations in earnest," a statement said.

GM explained the abrupt U-turn by underscoring "an improving business environment for GM over the past few months, and the importance of Opel/Vauxhall to GM's global strategy."

To survive, the US group must compete successfully in a turbulent global market focused on developing small, fuel-efficient cars.

Europe leads the United States in this field, and GM needs Opel's expertise, Metzler Bank analyst Juergen Pieper told AFP.

"The strategic importance of Opel is enormous," he said.

US rival Chrysler made the same choice when it agreed to a takeover by Italy's Fiat.

Analysts expect the economic crisis to foster highly selective alliances to share technology for electric cars and the geographical reach of distribution networks.

The Magna deal had raised questions about the strategy of Sberbank, which is state owned, and possible plant closures in Europe.

Magna, which had planned to cut about 10,500 jobs, said it accepted GM's decision, in contrast to reactions in Berlin and Moscow.

A spokesman for Russian Prime Minister Vladimir Putin said GM's announcement "arouses surprise in Russia, and the Russian government in particular."

Germany had spent months haggling with GM, the European Union and Magna over billions of euros (dollars) of aid for the car operation.

The decision from Detroit dealt a blow meanwhile to German Chancellor Angela Merkel who was in Washington on Tuesday. She backed the sale to Magna to save German jobs in tortuous talks ahead of a general election that she then won.

Her cabinet met on Wednesday to discuss the news after Bruederle demanded details of how GM would restructure Opel.

Opel has about 25,000 workers at plants in Germany and 4,700 at two Vauxhall factories in Britain.

A spokesman for the British Department for Business said London "would be willing to provide funding" for GM's restructuring of the factories if the "right long-term sustainable solution is identified."

Berlin meanwhile said it would press for repayment of a 1.5-billion-euro (2.2-billion-dollar) loan it had made to GM.

As GM toiled through a US government-backed bankruptcy reorganisation, the sale of the loss-making European unit turned into a major controversy as governments in Europe fought to save their parts of the automaker.

GM president and chief executive Fritz Henderson said on Tuesday that the decision "was deemed to be the most stable and least costly approach for securing Opel/Vauxhall's long-term future."

Henderson estimated restructuring costs at 4.4 billion dollars (three billion euros), "significantly lower than all bids submitted as part of the investor solicitation."

He vowed to work with European unions, but those in Germany swiftly promised nationwide protests, while others in Spain and Belgium called for clarification on what the GM decision meant for their members.

Last month, European Union regulators cast doubt on the deal with Magna, pointing to "significant indications" that German aid of 6.6 billion dollars had been offered only if Magna and Sberbank won the bid.

Pieper expected GM to seek state aid as well from Germany and other European governments, even though the US group could probably now secure the necessary funds from banks.

The analyst noted that "it's difficult for the German government to say yes to one party and not to another.

"I'm looking forward to see how they do it," he added.

He called GM's decision "a quite logical outcome" because the US group was financially stronger and "starting to look towards the future."

German automotive professor Stefan Bratzel said GM offered "a long-term perspective that Opel would not have had with Magna."

William Ickes/AFP/Expatica


1 reaction to this article

Mike J posted: 2009-11-10 22:48:19

I seen this coming from GM, and felt it was a matter of time.

<a href="http://www.germancarenthusiast.com">German Car</a>

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1 reaction to this article

Mike J posted: 2009-11-10 22:48:19

I seen this coming from GM, and felt it was a matter of time.

<a href="http://www.germancarenthusiast.com">German Car</a>

Add a comment
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