GM Reaches Deal to Sell Opel and Vauxhall to Magna

By Brendan Moore

09.10.2009

Opel logoAfter months of sometimes-contentious discussions over Opel’s fate, GM has announced that they will sell 55% of Opel and Vauxhall to Magna Intenational and its Russian partners, the automaker GAZ and the government-controlled bank, Sberbank. The deal calls for GM to retain 35% ownership and for Opel employees to have a 10% stake in the new structure.

GM has over 80 years of history with Opel in Europe, and now enters a new era of that history as minority owner. At the same time, the deal offers both Magna and its Russian partners a chance to be something important in the world of international auto manufacturing, a new experience for those entities.

Magna, the Canadian-Austrian parts supplier, has long been a major player in the auto parts supplier sector, and will now be a full-fledged manufacturer. GAZ and Sberbank have mainly confined their business efforts to their home country of Russia in the past, and are now on a larger stage.

Magna was the heavy favorite of the German people and the German government to get Opel; it was believed that the other potential bidders would eliminate a much greater number of German jobs under their proposals.

GM, however, has a tremendous amount of concern regarding the transfer of technology to GAZ, Magna’s partner. GM competes hard against GAZ in Russia, a fast growing automotive market.

Additionally, GM has increasingly relied on Opel to provide new car platforms and technology for the North American market, and wants to make certain that it continues to have the ability to keep doing that in the future.

These concerns are so great that GM was actually considering working out a deal in the last couple of weeks to keep Opel, but, with a price tag of over $6 billion USD, it just wasn’t feasible, and GM decided to sell to Magna and its partners. GM has included some conditions in the deal to safeguard their technology and ownership rights that are as of yet unknown, and could conceivably still scuttle the deal.

But, it was all smiles today as GM CEO Fritz Henderson said, “The hard work over the past two weeks to clarify open issues and resolve details in the German financial package brought GM and its board of directors to recommend Magna/Sberbank.”

Henderson added that GM will “continue to closely collaborate with Opel and Vauxhall to develop and produce more great cars, such as the new Insignia and the new Astra.”

German Chancellor Angela Merkel must be happy about the outcome; not only is the winner of Opel, Magna, which was Germany’s choice all along, the decision was announced before German national elections on September 27, which promise to be close. GM’s hesitation over Magna had grown into a domestic issue of some consequence and Merkel was taking heat for not being able to get the deal done under her watch.

Merkel has already told German voters that she and her party, the conservative Christian Democrats, are responsible for the positive resolution of the deal, citing the tenacity with which she went after the result, and has declared that she is “very pleased” with GM’s decision regarding Opel.

Frank Stronach, the CEO of Magna, has got be just over the moon regarding GM’s decision – he has finally realized his dream of Magna becoming a full-fledged manufacturer after much waiting and struggle. He is now in the big-time.

GM?

Well, you have to believe that their preferred outcome would have been to retain a successful Opel/Vauxhall, but Opel is bleeding rivers of red ink, German sentiment had decisively turned against continuing GM majority ownership, GM is still in precarious financial straits themselves, and the cards were all stacked against GM continuing to own Opel outright. They probably made the best decision they could at this time regarding Opel.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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3 Comments

  1. There will be some “leakage” over to GAZ, you better believe it. GM should worry because “patent” is a flexible concept in Russia.

  2. I would had wished for Fiat instead…

    theraison got a point about “leakage” but I can also add we could wonder if Opel/Vauxhall might face the same fate as LDV, a remnant of British Leyland who was at the time of its closure, owned by the same persons who run GAZ? I saw an article from March about it http://www.autosavant.com/2009/03/23/another-remnant-of-british-leyland-faces-ruin/

  3. Merkel was really sweating it in Germany. She was really hacked off when GM postponed the decision last time.

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