GM Board Votes to Keep Europe's Opel

GM Board Votes to Keep Europe's Opel

By Michelle Krebs November 3, 2009

General Motor board of directors, meeting in Detroit Tuesday, has voted that the automaker keep its European subsidiary Adam Opel AG in light of the improving environment for GM and the importance of Opel and Vauxhall, its British entity, to its global strategy, the automaker said in a statement issued late  Tuesday.

GM, however, will initiate a restructuring of its European operations "in earnest," it said. 

GM has a tentative agreement to sell Opel to Canadian-Austrian parts supplier Magna International, with the financial backing of Russia's Sberbank.

GM President and CEO said in the statement that "GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable consideration." That translates to government aid.

"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 3 billion euro, significantly lower than all bids submitted as part of the investor solicitation, the automaker noted. 

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," GM said. 

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 modernization of its operations and the joint development of the Russian vehicle market on a mutually attractive basis.  More details on the next steps in the restructuring will be provided as the plans and developments warrant.

The deal, which took months to narrow down to a single bidder and hammer out details of a complicated agreement, was supposed to be done in early October and then by the end of November. However, it was delayed over labor issues and conditions and terms for government financing.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.