General Motors Co. will retain its Adam Opel GmbH operation, reversing at the eleventh hour plans to sell the German auto maker to a consortium led by Canadian parts maker Magna International Inc.
GM cites improving business conditions in recent months for the change in direction, which kills a final sale agreement the auto maker had reached with Magna in September.
Word first spread last month GM was considering holding onto Opel and its U.K. sister Vauxhall as it struggled to hammer out details of the deal with Magna and win over crucial financial support from the German government.
Those hurdles were thought to be cleared, even with GM’s board of directors postponing its final approval of the deal until today to review whether Germany’s financial backing was offered to all bidders.
“GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable consideration,” GM President and CEO Fritz Henderson says in a statement.
“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.
“This was deemed to be the most stable and least costly approach for securing Opel/Vauxhall’s long-term future,” Henderson says.
GM says it anticipates restructuring expenses at Opel of €3 billion ($4.4 billion), an amount “significantly lower than all bids submitted as part of the investor solicitation.” The auto maker also says Opel is outperforming its viability plan and calls the unit’s immediate liquidity “stable.”
“While strained, the business environment in Europe has improved.” Henderson says. “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.”
The deal with Magna was valued at about €5 billion ($7 billion) and would have given Magna and its Russian partners – state-controlled OAO Sberbank and auto maker OAO GAZ Group – an equal share of a 55% stake in Opel. GM would have kept 35% and Opel workers 10%.
A deal GM reached to sell its Saturn division to auto dealership czar and entrepreneur Roger Penske also fell through last month. GM will instead wind down the division.
However, GM did reach a definitive agreement for the sale of its Hummer luxury SUV division in October to China-based Sichuan Tengzhong Heavy Industrial Machinery Co. Ltd. It is now pending regulatory approval.
GM’s Opel decision comes the same day the recently bankrupt auto maker reports a 0.9% uptick in U.S. sales, breaking a string of 21 consecutive monthly, year-over-year sales declines.
