Since the company’s emergence from bankruptcy in July, GM had planned to sell its struggling unit. Initially, when the company failed to choose between the Magna and RHJ, the companies bidding for Opel, speculations were rife that GM will not sell the unit.
Ending months of speculations over the fortune of its European arm, GM agreed in September to sell majority stake of its Opel unit to a group of buyers led by Magna International Inc.
As per the agreement reached earlier, GM had decided to sell 55 percent stake in Adam Opel and Vauxhall units to Magna International Inc., Russian bank OAO Sberbank and Russian carmaker OAZ Gaz. Opel employees would have kept 10 percent, and remaining 35 percent was supposed to be retained by GM.
Reason for scrapping the deal
But at a monthly meeting on Nov. 3, the company reversed its decision.
Explaining the reason for scrapping the plan to sell Opel, the company stated that the board has taken this decision because, of "an improving business environment for GM over the past few months, and the importance of Opel/Vauxhall to GM's global strategy".
Further, the board was never comfortable with the deal because the company would have lost up to 1.5 million vehicles' worth of sales. Since Opel is the engineering hub for company’s compact cars and midsize sedans, the deal would have spelled ceding control over all engineering resources.
The board has pushed the deal earlier as it had no choice. The German government had refused to provide finances to restructure the struggling unit. The only way out was to sell Opel to Magna as the government promised GM 4.5 billion Euros in government guarantees for accepting Magna’s bid.
The announcement, to scrap the deal, has come as a blow to German Chancellor Angela Merkel, whose government had throughout supported the sale of Opel to Magna and had actively been involved in the talks.
Confirming the deal in September, she had said, "The government's patience and purpose has paid off."
GM to negotiate with governments and union
With GM deciding to retain control over its unit, Fritz Henderson, president and chief executive, will on Nov. 15 present a plan to restructure its European arm.
The company will negotiate with the European governments for financing its unit. It will also have to negotiate with IG Metall, the union representing Opel workers, over concessions. The company is planning to lay off around 10,000 of its 25, 000 employees at its Opel unit.
"We understand the complexity and length of this issue has been draining for all involved. However, from the outset, our goal has been to secure the best long term solution for our customers, employees, suppliers and dealers, which is reflected in the decision reached today,” said Henderson.
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