General Motors tonight surprised the world by pulling its proposed sale of its European division – Opel and Vauxhall – to Magna. In a dramatic U-turn, Detroit said ‘an improving business environment for GM over the past few months’ had made it reappraise its spin-off plans.
The 11th hour switch means that GM will still retain full ownership of Opel and Vauxhall, which will now ‘be restructured in earnest’. Canadian parts giant Magna had won the race to buy a controlling stake in GM Europe, as a newly relaunched Detroit sought to shore up its finances. The group lost nearly $31 billion in 2008.
However, the negotiations had drawn out for months, amid political infighting among European states nervous that the large €4.5 billion loan from the German government would guarantee minimal job cuts in Opel’s German factories.
GM first said it planned to spin off Opel/Vauxhall back in March 2009, before a Canadian-Russian consortium led by Magna won the bidding race in September 2009. At one point last summer, the Fiat Group had seemed the front-runners to buy GM Europe.
So GM has literally torn up the agreement to sell Opel/Vauxhall?
That’s what it wants to do. However, some commentators in Germany doubt the legality of this. GM Europe is technically owned by a trust headed up by two GM representatives, two German politicians and one independent member.
Fritz Henderson, president and CEO of GM, said tonight: ‘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.
‘GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable consideration. We understand the complexity and length of this issue has been draining for all involved.’
What next for Opel and Vauxhall?
Change still looms large in Russelsheim, Luton and Ellesmere Port, it seems. Henderson said he would consult with all European labour unions over any planned job cuts but warned ‘time was 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.’
Opel employs 54,000 staff around Europe, including some 25,000 in Germany and 5500 in the UK.