Business NEWS

General Motors calling off Opel Vauxhall deal to Magna, Frank Stronach dream dies- less job cut

By Thomas Frommherz for CEOWORLD Magazine Updated:November 4, 2009

General Motors (NYSE:GRM) has opted to keep the European business Opel after a year of uncertainty and high-stakes political negotiations.

Now its clear that, GM was never keen on the deal with Canadian Mr. Stronach’s Magna International (TSE:MG.A) and his Russian partner Sberbank– it was forced into the decision by the Germans with the promise of $6.58 billion in state aid.

The proposed sale to Magna had threatened more than 10,500 jobs across Europe.

But GM said they had decided to keep Vauxhall and European car business Opel and “move forward with restructuring the business”.

Canadian multi-millionaire Frank Stronach’s lifelong dream of owning his own carmaker has been shattered for the second time in two years.

Despite that, GM’s board of directors’ gutsy decision to keep Opel within the corporation is good news for the long-term future of the automaker’s U.S. and European operations. But, returning Opel/Vauxhall to a profit will require thousands of layoffs and possible plant closings.

Tony Woodley, joint leader of Unite, the union, said the decision was “fantastic”, adding: “There is no logic in breaking up the company. I believe it is the right decision for Britain and our plants.”

He called on Lord Mandelson, the Business Secretary, to demand that GM give guarantees about future production.

Germany’s government estimated job losses of 10,900 under the sale of Opel/Vauxhall to Magna.

Chancellor Angela Merkel’s spokesman, said in a statement early Wednesday that the government expects GM to repay on time EUR1.5 billion in bridge financing meant to keep Opel afloat. That financing is due to expire Nov. 30.

In May, the German government pledged to help fund Opel with EUR4.5 billion, but suggested the financing was meant to support the bid to sell a majority of Opel to Magna and its Russian banking partner, Sberbank (SBER.RS).

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