General Motors (GM) has announced plans to cancel the sale of a majority stake in its European car business Opel, including its UK brand Vauxhall, to Canadian auto-parts maker Magna International, Inc.
The US car maker’s decision to sell its main European business was made after it was forced to announce a group-wide loss of $30.9 billion for 2008, after its sales took a turn for the worst in the global recession.
However, with financial support from the US government, and a brief period in US bankruptcy protection this year, GM has since turned around its destiny.
The US giant said in a statement that its board had made the decision because of "an improving business environment for GM over the past few months,” and added that it had come to its decision because of the importance of Opel and Vauxhall to its global strategy.
On Tuesday, GM said its US sales had risen in September for the first time in almost two years, and car analysts say they are not too surprised by the announcement.
"GM never really wanted to get rid of Opel, they were being forced into it because of their financial situation," said Aaron Bragman of HIS Global Insight.
"A lot of GM cars have come out of Opel's engineering, so Opel provides a very useful service for GM globally,” said Bragman. "Maintaining that foothold there is something that is beneficial for GM in the long run."
Magna co-chief executive officer Siegfried Wolf said, "We understand... it was in GM's best interests to retain Opel. We will continue to support Opel and GM in the challenges ahead."
However, there was anger in Germany, as Gm’s decision was a sharp blow to government and labor officials who saw the abandoned deal as the restructuring option that would save the most jobs in Germany.
The German government had put up a 1.5 billion euro bridge loan to keep Opel afloat until a buyer was sought, and promised 4.5 billion euros ($6.7 billion) in financial aid so Magna and Sberbank could take a 55 percent stake.
Juergen Ruettgers, the governor of North-Rhine Westphalia criticized GM's decision. "After many promises and months of negotiations, the head of GM has left workers out in the cold," Ruettgers said. "This attitude from General Motors shows the ugly face of turbo-capitalism. It is completely unacceptable."
German Economy Minister Rainer Bruederle also called GM's behaviour "totally unacceptable", while Christine Lieberknecht, the premier of Thuringia state, home to an Opel plant, called the decision a "low blow."
The German media is also questioning how easy it will be for GM to simply cancel the sale agreement, since ownership of Opel and Vauxhall was transferred into a trust, headed by two representatives from GM, two from the German government and one independent member, when GM went into administration.