BREAKING: GM board opts to call off Opel sale
by Chris Shunk on Nov 3rd 2009 at 6:25PM 
After months of negotiations with supplier Magna and its Russian partner Sberbank, General Motors has decided not to sell its Opel unit. The General mentioned in the post-jump press release that the new board of directors came to the decision to keep Opel due to GM's recovering financial situation coupled with an improving business environment in Europe. GM's move to keep Opel comes just one week after EU's Directorate-General for Competition began investigating the sale to Magna to be sure it was based on sound financial footing and not because of political influence from Germany.
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]
PRESS RELEASE:
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.
Reader Comments (Page 1 of 3)
sfdenny 6:29PM (11/03/2009)
Good news!
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Derek 8:34PM (11/03/2009)
+1!!
hypermiler 9:52PM (11/03/2009)
How can it be a good news when it is the American taxpayers that will have to bail out Opel now, instead of German government?
Heck, Opel could be bankrupt tomorrow if the German government recalls 1.5 billion Euro bridge loan.
RMN 10:06PM (11/03/2009)
The German government wants Opel to stay afloat as well because Opel provides jobs.
hypermiler 10:22PM (11/03/2009)
@ RMN
> The German government wants Opel to stay afloat as well because Opel provides jobs.
But not under GM ownership. Germans see GM as the root of Opel's problems and that Opel could be fixed only if GM's gone. GM doesn't understand this and is betting that Germans wouldn't actually bankrupt Opel.
If bankruptcy is what it takes to remove GM from Opel's board, then so be it. Germans already recalled their 1.5 billion Euro loan.
Now Opel bankruptcy is inevitable, unless the US government injects 4.5 billion Euros into Opel.
sfdenny 10:46PM (11/03/2009)
It is my understanding GM is not allowed to use government loans for anything other than North American operations. And, they have said no additional funds will be needed. Personally, I think taxpayer's dollars have been well invested in the restructured GM, and I feel strongly that time will bear this out. It is easy to blame GM for their fate - and certainly not without merit, but Wall Street should be at the front of that line, along with the banking industry.
Why good news? I believe GM needs to stay in the European market for long-term success. Chrysler has struggled, partially because their game is largely confined to the home market. The Chevrolet brand is being grown in a wide variety of markets, but Opel is a long-term, well established and respected brand, and their cars have had a very positive effect on GM's domestic products. The coming Buick Regal is based on the Opel Insignia everyone here seems to be lusting after, and the Cruze is based on the same new-generation platform as the 2010 Astra.
RMN 12:12AM (11/04/2009)
Opel being in trouble financially is one thing, but as sfdenny said GM needs to sell cars in Europe. GM has pretty massive development budget and there's no way they can recoup that cost without selling cars in Europe like every other major manufacturer. I was glad to see Pontiac go but letting go of Opel didn't make sense long term.
jb32 12:19AM (11/04/2009)
Excellent news. Angela Merkel disgusts me for her complete lack of appreciation of America and GM. GM has invested heavily into Opel for years. America from the Marshal Plan thru the fall of the Berlin Wall to our massive defense spending to defend Germany and her answer was to scre us? Force GM to sell Opel so you can give SOMEONE ELSE German aid? WTF? Where was the logic of that? It was so obviously biased And after what Daimler did to Chrysler? For a woman she had a big pair of b@lls.
Good for GM and the US!
Bandit5317 6:32PM (11/03/2009)
It' been a while since I've heard any good news concerning GM business-wise. Glad to here it.
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angelov.todor 6:33PM (11/03/2009)
Put OPEL on Brazil, India and China market and cut off that Daewoo thing, which is called Chevrolet in Europe and some parts of Asia.
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hypermiler 9:54PM (11/03/2009)
@ angelov.todor
> Put OPEL on Brazil, India and China market and cut off that Daewoo thing, which is called Chevrolet in Europe and some parts of Asia.
Opel is not cost competitive like Daewoo is. Daewoo is more important to GM's survival than Opel is at this point.
Jonathon 6:33PM (11/03/2009)
Brilliant News.
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Mazda03 6:35PM (11/03/2009)
Good decision, since some of the newest and best platform are coming from this division!
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compy386 6:52PM (11/03/2009)
Now if we can only convince Ford not to sell Volvo...
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Hiimandy1 7:04PM (11/03/2009)
Well the guys who bought Aston Martin are in trouble now, maybe Ford could buy it back to make up for the loss of Volvo. Or they can just go back to the PAG since they're profitable now.
PS. I know this will not happen :(
UCJR 6:39PM (11/03/2009)
Insignia OPC! Astra OPC! Corsa OPC!
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Stugots 6:37PM (11/03/2009)
Yeah, Opel has been improving over the last couple of years, just look at the new Insignia. I'd never buy an Opel, but good to see that their jobs are safe for now.
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naturalyshocked 7:26PM (11/03/2009)
that's because you might have no clue.
but the in the past Kadet 16v GSI (nice exhaust tune and really pretty engine design with the red cover) en even the 8 valve 2.0I GSI (e model).
where pretty fast launching vihicles.
spinning wheels up to the 3rd gear.
i bet my nuts no standart 5.7 or 5.0 v8 could keep up in those days and i know they couldn't.
the first generation Astra GSI 16v (f model), had a stunning look back in those days and fast, (nice exhaust tune and really pretty engine design with the red cover).
my former teacher as amateur rally driver achieved 220hp by remapping the O.S and a a potentiometer.
quite a few people lost their lives with these cars and their speed.
my opel vectra A 2.5 24v v6 innocent and naughty GTI killer for traffic light races.
(engine design by cosworth)
faster than the mondeo v6 and golf vr6.
the only bad thing is, the 6000 rpm is realy fast and the the fuel cut off to abrupt.
it should have had a LSD differential from production plant.
otherwise a very pleasant car to drive with adjustable koni's.
on the highway the consume was like a 1900 tdi, but not realy much in the city.
the exterior of opel cars wasn't that bad, but i never liked the interior.
Stugots 7:14AM (11/04/2009)
Regardless of what you said, my friend, you might have not a clue what Opel is to us Germans; it's a love-it or hate-it thing since they came up with the Manta in 1970, which basically became THE iconic white trash ride.
Hybridthry84 6:55PM (11/03/2009)
A very good decision by GM. It might take a lot of work and money to restructure the division (I'm not exactly sure how much) but I think the long term payout is worth it. The products that are being produced by Opel are too important for GM outside the US and are increasingly important here too. I'm sure Buick is happy about this also:
http://www.autoblog.com/2009/10/16/na-spec-buick-regal-gets-posted-on-facebook/
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