General Motors has agreed to sell its Germany-based Opel division to Canadian auto group Magna International (MGA), GM management said Thursday, ending speculation that GM was looking to hang onto the European unit. Several key issues need to be worked out in the coming weeks, GM said, with the deal set to close "within the next few months."
The decision brings to close months of hand-wringing about what GM would do with Opel, which employs 25,000 people in Germany. Magna was the German government's preferred bidder as the Ontario-based concern had pledged to keep all of Opel's German manufacturing plants open.
In recent days, reports about what GM would do with Opel ranged from keeping the unit to selling it to one of two suitors: Magna or investment firm RHJ International of Belgium -- the latter bidder was firmly opposed by Opel employees as well as German officials.
Under the deal, Magna and Sberbank, its Russian partner in the venture, get a combined 55 percent stake in Germany-based Opel, as well as in Vauxhall. GM would retain a 35 percent stake, while Opel's employees would have 10 percent.
"GM will continue to closely collaborate with Opel and Vauxhall to develop and produce more great cars," GM President and CEO Fritz Henderson said in a written statement.
Thursday's deal requires the approval of the German government, which extended loans to GM to keep Opel running as the Detroit-based company pursued a buyer for Opel. There are other conditions attached to the sale, which include rights to intellectual property and financing.
GM emerged from bankruptcy in July with the U.S. government owning 61 percent of the company. Part of the restructuring plan called for GM to dump numerous brands, including Saturn and Pontiac, as well as Hummer and Saab, the Swedish automaker in which GM bought its first stake in 1989.
It had been thought that GM would hang onto Opel. But earlier this week, a report presented to GM's board showed "overly optimistic" assumptions were used by the automaker's management when preparing an earlier estimate to retain Opel.
The move to sell is a boon for German Chancellor Angela Merkel who lobbied for the sale of Opel to Magna, as a way to ensure that workers in her country would keep their jobs. The Opel unit employs some 54,000 people in Europe, including 5,500 workers at its U.K.-based Vauxhall brand.
If GM had decided not to sell to Magna, and instead chose to hang onto the German subsidiary, Opel workers were expected to protest, threatening to form a human chain around one of Opel's factories. By contrast, U.K. labor unions hoped GM would hang onto Opel, believing their Vauxhall jobs would be more secure under GM's control.
Introduction to Value Investing
Are you the next Warren Buffett?View Course »