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GM decides to keep Opel unit

The automaker says it will restructure the European firm instead of selling 55% of it to auto parts maker Magna International and Russian lender Sberbank.

November 04, 2009|Associated Press

General Motors Co. said Tuesday it would keep its European Opel unit and restructure it instead of selling a 55% stake to Canadian auto parts maker Magna International and its partner, Russian lender Sberbank.

GM's board of directors made the decision after determining that a 3 billion euros ($4.43 billion) restructuring plan was significantly lower than bids submitted for the division. GM Chief Executive Fritz Henderson added that Europe's business environment and GM's overall health had both improved since it put the division up for sale.

The decision ends a year of uncertainty for the troubled Opel brand and its English sister, Vauxhall. Henderson said in a statement that GM will present its restructuring plan to the German government soon.

Magna could not be reached for comment.

The move came even though Opel's unions reached agreement Tuesday with Magna for 265 million euros ($390 million) a year in cost cuts. Henderson said it will work with Europe's unions "to develop a plan for meaningful contributions to Opel's restructuring."

GM, which has lost more than $80 billion in the last four years and has received about $50 billion in aid from the U.S. government, had announced plans to sell Opel in order to focus on more profitable regions, including Latin America and Asia. But the potential sale had been fraught with complications. In August, GM rejected a deal to sell Opel to Magna because it preferred Brussels-based investor RHJ International.

The offer from RHJ International required less government aid but appeared likely to involve more job cuts in Germany, something the German government had been keen to avoid as it headed into elections in September.

After Germany agreed to provide some 4.5 billion euros ($6.6 billion) in financial aid for the Magna deal in September, GM announced it would sell Opel to the Magna consortium. But the deal was still set to face European Union scrutiny.

Last month, the EU set a deadline for Nov. 27 to decide whether the Magna and Sberbank takeover could cause competition problems. The EU also was considering examining German government subsidies to Opel. Germany hadn't formally asked for EU approval to give 4.5 billion euros to Opel's new buyers.

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