Citing an improving economy as well as the strategic importance of the brand, General Motors Board of Directors has voted to keep its Opel unit. It had been considering selling a majority stake to Magna International Inc. and partner OAO Sberbank.
This is the second change in plans for GM in its post-bankruptcy planning. Originally, it had planned to sell Staurn to Penske Automotive Group, but that plan fell through, and the brand will simply be dissolved.
The vote of the board sets aside an agreement to sell 55% of Opel to Magna, Canada’s largest car-parts maker, and Sberbank, Russia’s biggest lender. Instead, GM expects to spend about 3 billion euros ($4.42 billion) to restructure the money-losing unit and its U.K. twin Vauxhall, both money-losing units.
Additionally, the board's vote means it overruled Chief Executive "Fritz" Henderson, who had spent months negotiating the Opel - Magna agreement. However, GM is seeing better days. Since emerging from bankruptcy reorganization in July, and 60% owned by the U.S., it has seen car sales climb, reporting Tuesday that its October U.S. sales rose 4.7%. Some of its profits, however, might be attributable to the Cash for Clunkers program
Fearing job less if GM continued to own Opel, German Chancellor Angela Merkel had lobbied for the sale to Magna since May. GM notified Magna, Merkel and other European government officials before the announcement.
With the decision to keep Opel, GM will be asking European governments to chip in. European governments that host Opel or Vauxhall plants, including Germany, Poland, the U.K., and Spain, have been asked for about €3 billion ($4.43 billion) to help revamp its operations. About €2 billion of that is expected to come from Germany.
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