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Strategic Risk for GM was too high to Sell Opel

An inside look at how GM’s new Board of Directors slowly came to the conclusion to reject a third party investor.

by on Nov.04, 2009

Opel brought this new logo to Frankfurt, along with a new slogan: "Wir Leben Autos," or "We Love Cars."

Opel introduced a new logo this fall with the slogan: "Wir Leben Autos," or "We Live Cars."

John Smith, GM’s chief negotiator on the sale of Opel to an outside investor, today defended the decision by GM’s Board of Directors on Monday to retain Opel.

What many observers characterized as a surprising reversal of the board’s direction in September to pursue such a sale, and a possible slap in the face of CEO Fritz Henderson, was fundamentally a strategic move  made possible as GM’s businesses improved in Europe and the U.S. compared to the beginning of the year when  the sale was first seriously  explored.

So rather than deal with the complications of outside owners taking over GM’s key small car and technology supplier and the core of its European operations, GM will now go it alone and “restructure Opel/Vauxhall more quickly and more successfully than any other investor,” Smith promised.

Such a strategy has large inherent risks, of course, since European governments and labor unions had already endorsed the taxpayer financing, plant closings and contract changes that were necessary to make the sale of Opel/Vauxhall to Magna viable.

Canadian parts supplier Magna International and its partner Sberbank, the largest Russian bank, offered €250 million, about $400 million, for a 55% stake in Opel.

However, the deal was complicated, and there were concerns over the security of Opel’s future product plans and its central role in GM’s global strategy.