GM To Keep Opel, Sale To Magna Off

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GM To Keep Opel, Sale To Magna Off

By Nelson Ireson

November 3rd, 2009

Late last month reports emerged that GM's sale of Opel to a consortium of buyers led by Magna International and Russia's Sberbank could be done as early within weeks. Since then, the deal hasn't quite come to completion, undergoing scrutiny from the EU for fairness in the bidding process. Today, GM made all the hubbub around the Opel sale meaningless by announcing it has decided to keep the brand. GM CEO Fritz Henderson summed up the decision succinctly: "This was deemed to be the most stable and least costly approach for securing Opel/Vauxhall’s long-term future." He also acknowledged that the whole ordeal has been "draining" for all involved, but was unapologetic about the sale reversal. The drama isn't over, however, as the economic situation in Europe, especially for the car industry, is still touch-and-go. Quick action to restructure Opel/Vauxhall's operations and investment in the company by EU governments will be necessary to pull the company through according to the new plan. The delay that preceded the switcheroo was rooted in EU concern for the bidding process and its fairness. According to a late October posting to GM's FastLane blog by John Smith, GM Group Vice President, Corporate Planning and Alliances, "Last week, the Directorate-General for Competition expressed concerns about possible limitations on the availability of government financing for all Opel bidders, and how that may have influenced the selection process. "The German Government was asked by DG Competition to communicate its position on financing availability to GM and the Opel Trust Board who, in turn, were requested to consider the recommended bidder for Opel accordingly." Negotiation of the finer details was ongoing for about a month, though the agreement did make clear the general shape of the deal: GM would have retained 35% of Opel, with 10% reserved for Opel employees, and the Magna-Sberbank group would have taken the remaining 55%. Perhaps most telling in the whole deal, GM still has plans for the brand's cars here in the U.S. Although Saturn was previously the primary outlet for re-badged Opels in America, Buick recently confirmed a redesigned Insignia to be sold as the Regal.