GM Board Decides to Keep European Opel Unit

FILE - This April 21, 2009 file photo shows General Motors, GM, world headquarters in Detroit....

FILE - This April 21, 2009 file photo shows General Motors, GM, world headquarters in Detroit. General Motors Co. on Tuesday said its board of directors has decided to keep its European Opel unit rather than sell a 55 percent stake to Canadian auto parts maker Magna International. (AP Photo/Paul Sancya, file)

(AP)

General Motors Co. said Tuesday it will keep its European Opel unit and restructure it instead of selling a 55 percent stake to Canadian auto parts maker Magna International and its partner, Russian lender Sberbank.

GM's board of directors made the decision at a daylong meeting after determining that a 3 billion euros ($4.43 billion) restructuring plan was significantly lower than what GM would have had to contribute to other bidders for the division. GM CEO Fritz Henderson added that Europe's business environment and GM's overall health have both improved since it put the division up for sale.

The decision ends a year of uncertainty for the troubled Opel brand and its English sister, Vauxhall. Henderson said in a statement that GM will present its restructuring plan to the German government soon.

Ulrich Wilhelm, spokesman for Chancellor Angela Merkel said the German government "regrets the decision" by GM's board.

"With this decision, an investor process has been broken off which was conducted intensively by all those involved, including GM, over a period of more than six months," Wilhelm said in a statement. Germany now expects GM to strengthen Opel and to pay back the euro1.5 billion in bridge credit granted early this year, he added.

In a brief statement, Magna co-CEO Siegfried Wolf said his company would continue to support Opel and GM in the future.

"We understand that the board concluded that it was in GM's best interests to retain Opel, which plays an important role within GM's global organization," he said.

A spokeswoman for the Obama administration said the government was not involved in GM's decision to keep Opel.

The move came even though Opel's unions on Tuesday reached agreement with Magna for 265 million euros ($390 million) a year in cost cuts. Henderson said it will work with Europe's unions "to develop a plan for meaningful contributions to Opel's restructuring."