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GM decides to keep Vauxhall and Opel

After many months of assuming Magna would buy Vauxhall and Opel, GM has announced it will be keeping hold of its European division.

GM says that this is due to an improving business environment for the company over the past few months, and the importance of Opel//Vauxhall to GM’s global strategy.

GM will now initiate a restructuring of its European operations. The news has been welcomed in the UK, with Unite union chief Tony Woodley, a former Vauxhall worker, hailing the news as a “fantastic decision”.

But as news emerges of thousands of potential job cuts at Opel factories, unions in Germany said workers would begin walk-outs from Thursday in protest at GM’s decision. And the German government, which had backed the sale of Opel, demanded GM repay a £1.3bn loan.

German leaders and labour unions had favoured a sale to Canadian car parts maker Magna as the best way to save German jobs, as it included a guarantee that no German factory would be closed.

German politicians have reacted with anger and disbelief. Chancellor Angela Merkel had fought for months to arrange Opel’s sale to Magna and its Russian partner Sberbank, and had offered billions in state financing aid in return for promises to protect German factories.

GM is expected to ask European governments with Opel or Vauxhall plants for about â‚Ź3 billion to revamp the operations. Around â‚Ź2 billion of that sum is anticipated to come from Germany. However the German government is understood to have a low regard for GM’s management of Opel, and it will be interesting to see how any requests for finance are received.

“GM will soon present its restructuring plan to Germany and other governments and hopes for its favourable consideration,” said Fritz Henderson, president and CEO. “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, employee, 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.”

On a preliminary basis, the GM plan entails total restructuring expenses of about â‚Ź3 billion, significantly lower than all bids submitted as part of the investor solicitation. GM will work with all European labour 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.”

Henderson added that GM also hopes to build on its already significant business in Russia and to resume work directly with GAZ to contribute to both the modernisation of its operations and the joint development of the Russian vehicle market.

At the same time, the new Astra has won the Golden Steering Wheel award issued by Auto Bild magazines group in Berlin. This year’s election involved readers in 26 European countries, representing more than 40 million readers overall.

Perhaps GM sees its European operations as being vital in leading the way with efficient cars, thanks to both the new Astra and the forthcoming Ampera.