By on November 3, 2009

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Two days ago, TTAC’s Bertel Schmitt wrote: “GM may not have to sell Opel after all”. How right he was. In the latest twist on the endless Opel saga, GM’s Board of Directors has canceled the planned sale to Magna and Sberbank. With references to an an improving economy (and an uptick in US sales?) and Opel’s strategic importance to the mothership, CEO Fritz Henderson stated: “GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable consideration. We understand the complexity and length of this issue has been draining for all involved.” Magna had no (repeatable) comment. Former bidder RHJ said in October it was no longer interested.

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.”

Well, that was a vertigo-inducing ride, [GM].

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41 Comments on “Breaking: GM Does a 180; Decides to Keep Opel...”


  • avatar
    OldandSlow

    Oops the German elections are over. GM has obviously been stalling the final signing with Magna.

  • avatar
    Stingray

    And Bertel was saying on monday this could happen.

    Great. Keep up the good work

    This soup opera is over.

  • avatar
    Dimwit

    This isn’t a surprise. Actually the surprise would have been that Magna had gotten the company. I wonder if they can sue GM for poor faith bargaining.

    Shades of Fiat all over again.

  • avatar
    Tstag

    So do GM still expect some state aid off Germany? I can’t imagine that Angela Merkle will be happy about handing GM the cash instead of Magna. Makes the Germans look weak.

  • avatar
    TomH

    Magna joins the long ranks of entities screwed by GM. Welcome to the club. (Even if you are Canadian.)

  • avatar
    FloorIt

    Shouldn’t plane 4 be pointing towards the ground?

  • avatar
    Kyle Schellenberg

    “At the same time, GM’s overall financial health and stability have improved significantly over the past few months”

    How can he just make a blanket statement like that?

    If I have a terrible habit of spending more than I make and live off credit cards, magically taking away all my debt isn’t going to make me a more financially healthy and stable individual. It’s an excuse to start spending all over again.

    With GM desperately trying to hold on to Daewoo and Opel, them seem less and less like an American company every day.

  • avatar
    John Horner

    Maybe GM management is getting smarter. No automotive company can be a global powerhouse without a strong presence in Europe. In fact, considering how many growth markets are in Europe (former East Block countries) these days it is one of the places any smart company has to be. Period, the end. Quitting Europe should have never even crossed GM’s mind.

    The US should be scratching its head over why Mexico isn’t a growth market and should be paying as much attention to that question as to the Middle East.

    GM needs Daewoo and Opel in order to get back on strong footing. The US market is not where the real action is in the days, months, years and decades ahead.

  • avatar
    Stein X Leikanger

    As low as they’re flying to the ground these days, I’d recommend an Immelman, not a 180.

    http://en.wikipedia.org/wiki/File:Immelmann_turn.png

  • avatar
    Daanii2

    I’m shocked. I have to eat crow on this one. When Bertel posted a rumor that the Magna deal was in danger, I said he was wrong. Not so. He called it. I got it wrong.

    Never dull in the car industry these days.

  • avatar
    50merc

    Does Opel have the resources to provide the next Malibu and Impala? They used to make respected mid-size (for Europe) cars — how about now?

    In other words, might GM go “bipolar” (yes, I know) with one outfit for Asia and the other to serve up models for Europe and North America. I suppose the remaining question would be how to obtain trucks, SUVs and Caddies. I figure Buick will become just a Chinese operation.

  • avatar

    oh my, signs of intelligent life on the Board of Bystanders.

  • avatar

    As bad as GM has been, the fact remains that it’s strong in China, it has a foothold, increasing sales and a new factory in India, and GM’s Latin American operations are the one part of GM that seems to have the corporate culture that the rest of the company needs. That means GM is not badly situated in the three fastest growing markets in the world.

    All global manufacturers are trying to leverage their global assets. Ford has the One Ford plan, and Toyota’s recently announced path forward involves using their North American r&d facilities more fully. It makes sense for GM to keep Opel if it can afford to. Giving GM’s competitors in Russia access to the IP that Opel owns would be very bad strategically for GM.

  • avatar
    marc

    More good GM news today. What’s going wrong with the world, wheh all the doomsday propphets are being proven wrong?

    Great move GM. Now, as Tim Gunn would say, Make It Work!

  • avatar
    car_czar

    John Horner :
    November 3rd, 2009 at 8:04 pm

    No automotive company can be a global powerhouse without a strong presence in Europe.

    Other than Toyota, you mean?

  • avatar
    John Horner

    car_czar said: “Other than Toyota, you mean?”

    Toyota certainly has a presence in Europe including factories in France, UK, Poland, the Czech Republic, Portugal and Russia. I don’t expect to see Toyota bailing on the European market anytime soon, do you?

    http://www.toyoland.com/toyota/plants.html

  • avatar
    Porsche986

    Does Opel have the resources to provide the next Malibu and Impala? They used to make respected mid-size (for Europe) cars — how about now?

    The current Malibu is based on the Epsilon chassis, which was designed and engineered at Opel.

  • avatar
    tparkit

    That GM “decided” to keep Opel is one way to spin this outcome. I’d prefer to say GM was unable — so far — to get rid of the subsidiary. There could only be a deal to transfer this turkey to Magna if the German government et al would subsidize it. With everybody playing hardball, there wasn’t enough cash on the table to induce Magna to solve what is at bottom a political problem.

    We haven’t heard the last of this; a Delphi-style transfer of US taxpayer cash can still make this deal work, helping create the illusion that Washington is executing a free-market exit strategy from the car business.

  • avatar
    Stu Sidoti

    Gee, what a surprise.

    There was never a plan to sell Opel, only a plan to make the PTFOA think that they were trying to sell Opel.

  • avatar

    They should dump Daewoo and give small car development to Opel. I have little faith that the next Aveo refresh will stay competitive with the Fiesta.

  • avatar

    Sorry I missed the story. Was in the air from Beijing to San Diego. Here on station (once I found a Fry’s that has the powersupply for my laptop. Left mine in China ….)

  • avatar

    I thought we all knew this would happen…
    Poor F Stronach..Always the bridesmaid…at least he can cry into his golden pillow at night.

  • avatar
    Ion

    Duh, If their going to be using Opal to supply Buick with it’s own G8(and inevitable failure) the Regal, they’re not going to want to share the (minimal, if any) profits with Magna.

  • avatar
    car_czar

    John Horner :

    “No automotive company can be a global powerhouse without a strong presence in Europe.”

    “Toyota certainly has a presence in Europe including factories in France, UK, Poland, the Czech Republic, Portugal and Russia.”

    Well, Toyota had a 5.3% market share in Europe in 2008. So, is your point that 5.3% is a strong presence, or that Toyota’s not a global powerhouse? ;-)

  • avatar
    Detroit Todd

    Enjoy your re-election, Ms. Merkel. Now busy yourself with something else. Quickly.

    Frank Stronach? Vladimir Putin? Barack Obama? You guys can suck it, too.

    Now, on the whole, GM maybe be stupid, about many things. I’ll grant that. But in this particular situation, they played it absolutely pitch perfect. Couldn’t have been better, really.

    Bravo, GM! Well done!

  • avatar
    Nicodemus

    Technically you’ve illustrated a split-s which like an immellman has a different purpose than just a 180 change in direction.

  • avatar
    Tosh

    Next thing they’ll be canceling Saturn’s cancellation…

  • avatar
    Tricky Dicky

    Toyota also has a plant in Turkey which is part of their European operations and also a factory which employs over 600 people for the Formula 1 team in Germany. What was that? Oh, Toyota are quitting Formula 1?! OK, maybe they will hand it over to full scale production of the LF-A, so they can sell it at a price us mere mortals can afford :-)

    Well, congratulations Opel. You have not been set free. But you are part of a global company with a long-standing history. Good times are a coming… or probably not.

  • avatar
    Pat Holliday

    Everyone’s saying what a great day this is for GM, how well they’ve played this one, etc etc. Can someone please explain to me how cancelling a sale fixes things?

    So there won’t be any cash coming. Legacy costs and the thousand and one other problems affecting GM that this site has been documenting over the years still exist, so now what..

  • avatar
    dougjp

    The last straw, as if another of those was needed. How can anyone be positive about this? Look at the highly likely spin offs that the Board of Bystanders are too blind to see:

    – Workers to Strike, German Gov’t demands repayment. No further explanation required, its more than highly likely.
    http://ca.news.finance.yahoo.com/s/04112009/2/biz-finance-workers-strike-german-government-wants-bridge-loan-gm.html

    – What happens to Opel sales? Are any Europeans going to buy an Opel, meaning, willing to do business with GM? Would you? Maybe if you were a close relative depending on an Opel employee’s salary, or other wise memory challenged. Otherwise, NO. Oh, and are any Russians going to buy from GM in future?

    – After seeing once again (and another final straw) how GM “does business”, will anyone in North America agree to buy anything from them? Why? Other than the “Wavey da flag” types? Uh, looks good on ya, you are next to get screwed!

    Chapter 7 can’t come soon enough, and I hope these bozos lose their pension along with it.

  • avatar
    Pat Holliday

    This feels like that Simpsons episode – where Mr Burns sells the plant to some Germans. At the end he stiffs them, much to their dismay.

    “Oh no! The Germans are mad at me. Ooh the Germans! ooh they’re so big and strong!”

  • avatar
    Mr Carpenter

    I have a sneaking suspicion that we have not yet heard the last of Magna and auto production.

    China is starting to sort out its many car manufacturing enterprises quietly.

    Chinese automakers are starting to push their own “brands” (some cars of which aren’t even rip-offs of other manufacturer’s designs).

    I suspect that paybacks are going to be a bitch with Magna, and that Magna will simply look to a deal with a Chinese company to actually manufacture and distribute co-developed cars.

    My guess would be Guangzhou-Changfeng as a good candidate. Their self-branded Acumen car brand might just be viable in other countries. (Guangzhou works with both Honda and Toyota in China, and has learned very fast; Changfeng has worked with Mitsubishi and also has learned quickly). Gonow also has a JV with Guangzhou.

    Brilliance, on the other hand, just hived off its loss making Brilliance/Zhongua self-developed car brand, which would be a great fit for Magna.

    Instead of Chinese companies buying distressed European or US automotive properties, it would be a Canadian company buying into a distressed Chinese property.

    Yeah, I know the Brilliance spectacularly, epically collapsed in a crash test in Europe awhile back; a mere few months later, Brilliance put an improved car to the test and it passed with 3 or 4 stars.

    Perhaps recasting the cars as the Magna and building them in North America and Europe would give Magna a shot at an automotive empire.

    There are plenty of p*ssed off dealers in North America ready to take on the big 3 after being rejected and left to die…

  • avatar
    wmba

    Where’s the money coming from to:

    1)Pay back the German government’s bridge loan that kept this Opel “enterprise” afloat since GM folded into abject bankruptcy? That’s due RIGHT NOW.

    2)Refinancing funds to replace what the German government and Magna were going to inject into the sale? GM says governments and others across Europe. Utter BS.

    The money is coming out of Canadian and US taxpayers pockets. Nobody else is going to be stupid enough to lend money to this entity.

    The new GM board appears to be as awake as the old one. The way I see it Stronach is lucky to get out of this porcine affair with his money intact.

    Nothing GM says or does makes sense. Opel is screwed in Europe — no wonder that the workers are going on strike.

  • avatar
    FromBrazil

    As to GM’s situation in Latin America, I don’t know, but in Brazil I think they’re tanking. You see, they just launched the Daewoo designed and engineered Agile. And the market’s reaction? Everybody has been pretty much underwhelmed. I mean, when they launched the car and stated its starting price, the boos could be heard all the way in Detroit. So they decided to keep the price, but offer more content, allenging that what they’d said before had been a mistake. Talk of a botched launch.

    So this new sub-par car is supposed to spawn a whole family (sedan, station wagon, jeep, pick-up). In the mission critical low price car market. That why I predict they’ll be losing more and more ground. I mean, when they launched Opel’s Corsa here, at the same time they did in Europe, it was a big hit. But that car impressed everyone and was pretty much state of the art back then. This new Agile is a throwback and so, despite the best efforts of GM’s hard-working people down here, I’ll bet the results will leave the big dogs in Detroit scratching their heads.

  • avatar
    Pch101

    It’s understandable that GM would want to keep Opel. Europe provides a stable market for smaller cars, and playing there allows for GM to amortize its small car development costs across a larger, more consistent market for smaller vehicles than the US has.

    What isn’t understandable is how this can be supported financially. I suppose that the US taxpayer will end up having to pay for it, because GM surely isn’t producing enough revenue or profit to support this.

  • avatar
    NN

    The taxpayer money going to GM is not supposed to go to support foreign portions of the business. Is there any way it can be researched whether they are breaking this rule or not?

    GM was desperate trying to off Opel to the Russians/Magna. That was a suicidal idea. It’s good for GM that they got out of that and are keeping Opel. The German government was breaking EU laws anyways by funding Opel for German jobs with taxpayer money at the expense of Opel’s other European plants in Spain and the UK.

    Interesting saga.

  • avatar
    Pch101

    GM was desperate trying to off Opel to the Russians/Magna.

    It appears to me that GM never wanted to do the deal in the first place. It was driven by a lack of cash and its lack of options during the economic crisis, not by desire.

    The problem here is that the presidential auto task force has been disbanded. Now that GM has been left to make many of its own decisions again, it’s going back to being the old GM. That includes the mentality of being a large, sprawling company for the sake of it, even if that is unprofitable.

    We didn’t less government involvement, but more of it. The task force did a better job in a few months than GM management did over a few decades. The top of the company should have been turned over, but it wasn’t. So much for the wonders of free enterprise.

  • avatar
    Mr Carpenter

    Dear Pch101, please don’t blame free enterprise for GM’s debacle.

    The United States has not had free enterprise since early last century.

    A oligopoly such as GM and Ford with a few other players “allowed” to stay in the game (to avoid having GM dismantled, mostly) also doesn’t qualify as free enterprise.

    Neither does having one union representing all the workforce in the companies, by fiat (i.e. government decree – which is essentially what happened). That’s a monopoly.

  • avatar

    I knew GM didn’t really want to give up Opel. That was a dumb move in the first place, but one made in desperation.

  • avatar
    Autobraz

    I fully agree with FromBrazil. GM here is going down…

  • avatar
    Steven02

    @ dougjp
    Magna was going to do the same thing. Close plants and let workers go. This was going to cause strikes anyway.

    People in the US are still buying GM. My guess is that the same thing will happen in Europe and Russia.

    Chapter 7 may very will be in their future, but their pensions are safe. Gotta love our gov’t.

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