The board of General Motors Co has opted to keep Opel, undoing months of painstaking negotiations to sell the European unit to a Russian-backed group led by Canada's Magna.
GM confirmed the decision made by its 13-member board after a meeting of directors on Tuesday in Detroit, saying that improving business conditions and the strategic importance of Opel to its operations had prompted the decision.
"GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable consideration," GM Chief Executive Fritz Henderson said in a statement.GM said it expected that restructuring Opel on its own would cost about 3 billion euros.
The meeting of the GM board came after European Union officials asked GM to confirm that it would have decided to sell Opel to Magna if it had known that 4.5 billion euros ($6.58 billion) in state aid promised by Germany would go to any buyer.
Under pressure to focus on shoring up sales in its home market after emerging from bankruptcy, GM's board had earlier opted to sell a 55 percent stake in the loss-making Opel unit to Canadian group Magna and its partner Sberbank.
GM's move is a setback for Magna founder and chairman Frank Stronach, who left his native Austria at age 21 as an impoverished toolmaker but went on to build one of the world's biggest car parts groups.
Magna had no comment on the GM decision.
Opel's workforce -- which was to be cut by a fifth under the new owners from 50,000 -- was supposed to receive a 10 percent stake in the new company in return for 265 million euros in annual cost concessions. GM would have kept a 35 percent stake in the unit under the now-scrapped deal.
(Reporting by Kevin Krolicki, editing by Matthew Lewis)
Copyright 2009 Thomson Reuters
Take the first steps to building your portfolio.View Course »