GM cancels sale of Opel and Vauxhall to Magna

Nov 4, 2009
Eliot Sefton

General Motors pulls out of European sale – to union delight and German anger

Buoyed by "an improving business environment", the American car giant General Motors has suddenly decided not to sell its European business Opel - which includes the British brand Vauxhall - to the Canadian auto-parts manufacturer Magna, backed by the Russian Sberbank.

GM had never wanted to get rid of the Opel and Vauxhall marques but had been forced to arrange the sale after the Obama administration refused to use US taxpayers' money to bail out GM's foreign operations and the company filed for bankruptcy protection.

But after a relatively brief period of trouble, GM has bounced back, announcing yesterday that its US sales had risen in September for the first time in almost two years.

One reason for hanging onto Opel is that many GM designs have originated with the marque. Magna and Sberbank had big plans for the Russian market and it is understood GM executives were worried about blueprints for future models going to Russia "on the cheap".

Reaction to GM's 11th-hour decision to retain the European operation has been mixed:

Unite is the main union representing the 600 Vauxhall workers who faced voluntary redundancy at plants in Luton and Ellesmere Port under the Magna plan. General secretary Woodley admitted he was surprised by the news, but delighted to hear it.

GM's change of heart was an "incredible turnaround," he told the BBC. "There's no logic in breaking up the company. I believe it is the right decision in spite of a good deal that we'd struck with Magna."

The Canadian tycoon who heads one of the world's biggest auto-parts makers had long dreamt of Magna International becoming a fully-fledged car manufacturer. He and his Russian partners at Sberbank had agreed to buy 55 per cent of GM's European subsidiary, beating out other offers from RHJ International and Fiat.

Bearing in mind that GM is Magna's buggest customer for parts, Stronach was sanguine about the sudden turnaround, saying "life goes on".

"You take it as it comes and you go on and look for other opportunities," he said. "It's not for us to criticise the customer."

Germany's position is awkward because it sank millions into ensuring Opel's survival in the run-up to the September election, in which Merkel was returned to power, and had promised Magna a $6.7bn loan. But if Opel is to remain American-owned, they will want their money back.

Merkel's head of press, Ulrich Wilhelm, said Berlin regretted the GM decision and would expect GM to repay €1.5bn in bridge financing extended by German banks.

In the first reaction from a memebr of Gordon Brown's cabinet to the GM decision, the Business Secretary said: "I am keen for very early discussions with GM over plans for the business. If the right long-term sustainable solution is identified, the Government would be willing to support this."

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