After months of deliberation, the GM-Opel drama is finally over. At a board meeting held late last night, GM’s board of directors chose to retain its European operations (including Vauxhall) instead of selling it to Magna and Sberbank.
Until last night, rumors about GM keeping Opel seemed to be little more than speculation, as sources claimed (several times) that GM was signing a deal with Magna (often claiming week after week that the deal would be done “by the end of the week”). With the official announcement, it looks like the seemingly unsubstantiated rumors proved to be true. GM is officially keeping its German brand, citing an improving business environment as the reason for doing so.
With the retention of Opel, this means that GM must restructure Opel and its sister brand Vauxhall on its own. GM estimates restructuring Opel will preliminarily cost around €3 billion ($4.4 billion), significantly undercutting the amount of money Magna and Sberbank were going to need to restructure the company. However, GM must now pay for the restructuring on its own instead of relying on state aid promised to a potentially independent Opel.
“GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable consideration,” said Fritz Henderson, GM’s president and CEO. “This was deemed to be the most stable and least costly approach for securing Opel/Vauxhall’s long-term future.”
GM’s move to keep Opel is a setback for Angela Merkel, the German chancellor, as it leaves the issues of how GM will manage the labor negotiations and financing open to question. With a sale to Magna and Sberbank, Opel’s labor force was going to be reduced by about 20 percent, but Merkel had secured jobs at German factories. With the new plan, the potential for conflict with the European labor unions has greatly increased as GM must now negotiate new contracts with them.
By keeping Opel, GM gains an advantage it would not have had if it retained only a 35 percent stake in the company. GM still has full control over Opel/Vauxhall’s vehicle development and platforms. This will allow GM to continue developing vehicles based on Opel platforms (as the Buick LaCrosse and Regal are based off the Opel Insignia) or import Opel vehicles directly. GM has previously imported Opels to sell as Saturns. Retaining Opel allows GM to compete on a global scale much more easily.