GM might keep Opel after all

[Ma Deuce]

http://online.wsj.com/article/SB1251145 ... lenews_wsj

GM Balks at Selling Opel Unit

By JOHN D. STOLL

General Motors Co. is now considering whether it should retain its Opel and Vauxhall operations in Europe, a strategic reversal that raises new questions about the struggling car maker's direction and creates complications with the governments of Germany and Russia.

GM's new board of directors has instructed the company's management to consider new options for Opel/Vauxhall, including pulling together a $4.3 billion financing plan to rejuvenate the operations rather than sell them, as had been the company's plan since this spring, said three people involved in the matter.

Chief Executive Frederick "Fritz" Henderson has been charged with putting the funding plan in motion by the next GM board meeting in early September, these people said.

The move follows a meeting last Friday in which the board rebuffed Mr. Henderson's recommendation to sell Opel/Vauxhall to a consortium of Canadian auto supplier Magna International Inc. and a Russian bank and car maker. The German government has promised to help finance that deal and it has received vocal support from the Russian government.

GM earlier leaned toward a bid for Opel/Vauxhall from RHJ International SA, a Belgian private-equity group. The German government voiced objection to the RHJ proposal, in part because it could result in higher job losses there.

The change in plans by GM -- which is majority-owned by the U.S. government since its emergence from bankruptcy court last month -- presents a potentially difficult diplomatic situation for the Obama administration. Germany and Russia, both key trading partners and countries the U.S. must cooperate with in foreign policy matters, want the Magna deal to go through.

The German government has stayed in close contact with Washington on the Opel negotiations, and sought to get in touch with Secretary of State Hillary Clinton in the past few days about it, a person familiar with the matter said.

A senior GM executive is supposed to meet with German officials this week to discuss Opel's future, government spokesman Ulrich Wilhelm said Monday. The government is open to further talks with GM, but there must be a joint decision on Opel's future, Mr. Wilhelm said. "The issue can't be solved via confrontation but only together," he told reporters.

Russian officials couldn't be reached for comment, but the development is likely to anger that nation's government, which has committed much time and effort to securing approval for the Magna group deal. Russian Prime Minister Vladimir Putin has discussed the Russian participation in the Magna bid with German Chancellor Angela Merkel and looked to the deal as a way to aid the struggling Russian car industry, a major employer. Russian state-controlled OAO Sberbank would put up much of the money for the Magna purchase, which also would include Russian auto maker OAO Gaz Group.

So far, the U.S. Treasury Department is leaving the Opel decision to GM's directors, some of whom are appointed by the Obama administration, said a person familiar with the matter.

The Obama administration has repeatedly said it wouldn't extend further aid to GM. Any move that would involve GM using government money to bail out Opel would be politically contentious because it would be perceived as propping up a German company with U.S. taxpayer funds. The U.S. government has given GM about $50 billion since it almost ran out of cash late last year.

The sudden shift in GM's Opel plans shows that the new board, headed by former AT&T Corp. CEO Edward E. Whitacre Jr., is forcing a change in the way the auto maker is governed. For the last several years, as GM's troubles deepened, the board rarely opposed former Chairman and Chief Executive Rick Wagoner.

Opel has a substantial share in Western Europe's mature car markets and is seeing rapid growth in countries in the East such as Poland and Russia. For years it has taken the lead in developing small and midsize cars that GM makes and markets elsewhere. The popular Chevrolet Malibu is based on underpinnings developed by Opel.

But Opel suffered management changes and quality troubles in the 1990s, and has lost money since 2000. It is hurt in part by having many of its plants in Germany, where auto-worker wages are the highest in the world, and it faces stiff union resistance to efforts to downsize.

On Friday, Mr. Henderson presented the company's options on Opel to the board in hopes of winning support for the Magna offer, according to people familiar with the meeting. The board turned down the Magna deal, these people said, raising questions about how such a sale would affect GM's strategy in Europe, and also voicing concern about specific details related to the German government's financing commitment.

The board asked the management team to prepare more scenarios for Opel, including a plan to raise billions of dollars in new financing that would allow GM to keep the operations, these people said. Another option to be considered, albeit remote, is liquidating Opel.

—Gregory L. White, Josh Mitchell and Andrea Thomas contributed to this article.

Not a done deal by any means, but an interesting development nonetheless, especially since this delay is being created by GM's new board against the wishes of the CEO who apparently would like to see the Magna deal (which is also preferred by the German government) concluded as soon as possible. Although at the moment it appears the board simply wishes to see details on alternatives to the Magna deal before making a decision, as the article mentions if the board does vote to keep Opel it could create political problems, not just for GM but also the US government which is GM's majority shareholder, thus whom the majority of the GM's board now represents.

[Thanas]

Well, if they don't sell Opel to Magna, the german government will call in several billions of loans. Does GM have that time of money lying around atm?

[Serafina]

Well, if they don't sell Opel to Magna, the german government will call in several billions of loans. Does GM have that time of money lying around atm?

Isn't that evil protectionism?

But it's interesting to realise that the german goverment actually has means of pressure here - and it's even more interesting that i did not see a single mention of that in the media yet.

[Sephirius]

If what I read in the automotive blogosphere is to be believed, GM is going to attempt to pull the same stunt they did themselves with Opel/Vauxhall. Force Opel to delcare Ch. 11 (or whatever the equivalent is over there) and buy the company wholesale to remove non-US interests.

[Dahak]

Personally, I find it hilarious, that the German politicians are shaking their fists at GM basically because GM is denying them a chance to prop themselves up as "saviours of Opel" just weeks before the election.
I would prefer the bankruptcy solution for Opel, I just don't see that Magna/Opel or RHJ/Opel is big enough to survive on its own. And I never saw why the German state has to finance what is basically a failing business model biting Opel in the ass.

[Ma Deuce]

Well, if they don't sell Opel to Magna, the german government will call in several billions of loans. Does GM have that time of money lying around atm?

Depends on how much they can mortgage out of their Chinese assets, which is how they intend to finance the "re-acquisition" of Opel, should they decide to go through with it.

[dragon]

Well, if they don't sell Opel to Magna, the german government will call in several billions of loans. Does GM have that time of money lying around atm?

Isn't that evil protectionism?

But it's interesting to realise that the german goverment actually has means of pressure here - and it's even more interesting that i did not see a single mention of that in the media yet.

Oh trust me the German news more than makes up for the lack of news there. Seems like every news program on TV, Radio and the news paper mentions it here in Germany. And the Germans are not happy at all.

[salm]

Isn't that evil protectionism?

But it's interesting to realise that the german goverment actually has means of pressure here - and it's even more interesting that i did not see a single mention of that in the media yet.

Oh trust me the German news more than makes up for the lack of news there. Seems like every news program on TV, Radio and the news paper mentions it here in Germany. And the Germans are not happy at all.

You might want ot check her location.

[dragon]

Isn't that evil protectionism?

But it's interesting to realise that the german goverment actually has means of pressure here - and it's even more interesting that i did not see a single mention of that in the media yet.

Oh trust me the German news more than makes up for the lack of news there. Seems like every news program on TV, Radio and the news paper mentions it here in Germany. And the Germans are not happy at all.

You might want ot check her location.

Hum missed that part, but still tons of it in the news here. At least according to my German wife as I still am in the process of learning Deutsch.