GM decides not to sell European Opel division

DETROIT — The new board of General Motors reversed course Tuesday on the planned sale of its Opel division in Europe and decided that GM would retain and reorganize the business itself.

The decision was a blow to the Canadian auto supplier Magna, which was poised to acquire a 55 percent stake in Opel with the backing of the German government and labor unions.

GM put Opel up for sale in the spring as it headed toward bankruptcy in the United States, and GM management had selected Magna as the preferred bidder.

But at a board meeting Tuesday in Detroit, GM directors decided that the automaker would be better off keeping the European unit because it was a critical part of its global vehicle-development strategy.

GM's chief executive, Fritz Henderson, said that the company would present a revamping plan to European governments soon, which would probably include plant closings and job cuts.

The company said it expected to spend $4.4 billion to downsize operations, which it said was "significantly lower" than what Magna and other bidders had projected.

"This was deemed to be the most stable and least costly approach for securing Opel/Vauxhaull's long-term future," Henderson said in a statement.

The decision to keep Opel is another example of the aggressive approach of GM's board, a majority of which was selected by the Obama administration.

The board said an "improving business environment for GM" and the importance of Opel to GM's global product plans prompted the decision.

Germany's chancellor, Angela Merkel, had pushed for the sale to Magna and its Russian partner, Sberbank.

Magna, which is among the world's largest auto-parts makers, had pledged to preserve jobs, notably in Germany where Opel has its largest concentration of factories and workers.

But the European Union raised concerns that a German government's commitment to provide about $6 billion in aid to Opel might have prompted GM to select Magna.

German officials responded that the loans to Opel would have been available to other bidders or possibly even GM itself. That opened the door for the GM board to reconsider the decision to sell Opel.

Henderson said GM felt that Opel was too integral to its overall operations. Opel is the source of GM's small cars and fuel-efficient engine technology.

Whether Germany and other European governments will aid GM in its plans is uncertain. German labor and government officials have been critical of GM's management of Opel.

Henderson said GM would work with its labor unions to make "meaningful contributions" to fixing Opel. He also said that the division was not in immediate danger of running out of money but would require a significant investment soon.

"While Opel continues to outperform against its viability plan assumptions and immediate liquidity is stable, time is of the essence," he said.

Industry analysts had expressed concern that much of GM's efforts to broaden its small-car lineup would be undercut by the sale of Opel.

By keeping Opel, the GM board underscored a growing sense inside the automaker that it was on a rapid road to recovery after its bankruptcy this summer.

GM has not released any detailed financial information since it emerged from Chapter 11 on July 10 with the federal government as a 60 percent owner. The company is scheduled to release a third-quarter report in mid-November.