BREAKING: GM board opts to call off Opel sale
GM CEO Fritz Henderson added in the company's release that the process was difficult for all parties but in the end "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. This was deemed to be the most stable and least costly approach for securing Opel/Vauxhall's long-term future."
Now that GM plans to keep Opel in its brand portfolio, the next move is to proceed with a painful restructuring that could see the loss of 10,000 jobs and the elimination of 30% of the Euro unit's structural costs. The reported tally for the restructuring could cost GM upwards of $4.4 billion, and some of that could come courtesy of cash received as part of the company's $50 billion US government bailout.
Now that GM is out of bankruptcy, the company is reportedly no longer barred from using bailout funds for countries or regions outside of the US. It's also possible that GM could get loans from Germany and or Great Britain to finance the restructuring. The Detroit MI-based automaker also intends to work with European unions to develop a plan that contributes to Opel's restructuring. Hit the jump to pour over GM's press release.
[Source: Detroit News]
DETROIT – Given an improving business environment for GM over the past few months, and the importance of Opel//Vauxhall to GM's global strategy, the GM Board of Directors has decided to retain Opel and will initiate a restructuring of its European operations in earnest.
"GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable consideration," said Fritz Henderson, president and CEO. "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, 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."
On a preliminary basis, the GM plan entails total restructuring expenses of about € 3 billion, significantly lower than all bids submitted as part of the investor solicitation. GM will work with all European labor unions to develop a plan for meaningful contributions to Opel's restructuring. While Opel continues to outperform against its viability plan assumptions and immediate liquidity is stable, time is 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. We are grateful for the hard work of the German and other EU governments in navigating this difficult economic period. We're also appreciative of the effort put forward by Magna and its partners in Russia in trying to reach an equitable agreement."
Henderson added that GM also hopes to build on its already significant business in Russia and to resume work directly with GAZ to contribute to both the modernization of its operations and the joint development of the Russian vehicle market on a mutually attractive basis. More details on the next steps in the restructuring will be provided as the plans and developments warrant.
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