General Motors Channels Its Inner Gollum: Hangs On To Opel

November 4, 2009

In a move that was almost telegraphed, General Motors has announced today that it will keep its European subsidiary Opel/Vauxhall.

In a press release from GM, CEO Fritz Henderson spoke about the decision,

While strained, the business environment in Europe has improved.  At the same time, GMs overall financial health and stability have improved significantly over the past few months, giving us confidence that the European business can be successfully restructured. We are grateful for the hard work of the German and other EU governments in navigating this difficult economic period. Were also appreciative of the effort put forward by Magna and its partners in Russia in trying to reach an equitable agreement.

In terms of moving forward with the revised plan Henderson stated,

GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable consideration.  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/Vauxhalls long-term future.

General Motors cited improving conditions, but many auto analysts had questioned the move from the beginning.  Given General Motors push towards globally shared platforms, it was questionable to hand over control of a key developer of those platforms to a third party.  For example, the Opel Insignia is sold in China and next year in the United States as the Buick Regal (view a slideshow of the Chinese Buick Regal in this link):  Essentially the same car with only light retouching.  General Motors' South American offerings also draw heavily from Opel platforms.

The next big hurdle for GM will be pacifying Opel's workers, no easy task considering that workers put their full support into the Magna deal.  As for Magna?  Many analysts feel that the company dodged a bullet and is better off without the distraction that running Opel would have presented.

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