GM Board Recommends Sale of Opel Unit to Magna and Russian Bank
9/10/2009
GM’s board agreed to sell its Opel and Vauxhall units to Magna International, a Canadian and Austrian auto-parts manufacturer, and Russian auto maker OAO GAZ Group which is controversially backed by Russian controlled OAO Sberbank, ending an uncertain bidding war that included rival bidder R.H.J. investment bank from Belgium. The German government, which is financing a large part of the deal, has yet to approve, although Magna was their preferred option.
If the plan being recommended by GM’s board is approved by labor unions and the German government, GM will keep a 35 percent stake in Opel, while conceding 10 percent to Opel employees and a majority 55% stake to Magna International/Sberbank.
Having recently emerged from bankruptcy, GM has been quick to sell or kill off units such as Hummer, Saturn, Pontiac, and now Opel. Pontiac was not sold, and is being allowed to die off, while Hummer and Saturn are finalizing deals to be sold. Unlike with those units and their often out of date technology, GM has much to lose with the sale of Opel. Not only was Opel GM’s main European presence over the past 80 years, but it now has the same shared technology in the Opel Ampera as is in the upcoming Chevy Volt Electric Car. There had been previous reservations about selling Opel to Magna due to having to share technologies such as the Voltec powertrain with Russian owned companies, and GM over the past few weeks had even considered canceling the sale and holding on to Opel.
Under the board announced deal, Opel/Vauxhall will remain a fully integrated part of GM’s global product development and all parties – GM, Magna, OAO GAZ Group – will exchange technology and engineering resources. Current vehicles in Opel’s pipeline will continue to be built on schedule, including the Ampera, Insignia, and Astra.
It is unlikely that the German government will finalize the deal until after the September 27th elections but we don’t see a reason for it to be denied. German approval is vital due to the large financing package the government is offering to secure the sale. Fritz Henderson, President and CEO of GM sounded positive that the deal will be approved, having 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.”
