Official: GM to sell Opel and Vauxhall to Magna

AFTER months of negotiations with a series of potential suitors, General Motors has agreed to sell a 55 per cent stake in its European operations Opel and Vauxhall to a consortium led by Canadian-based car parts giant Magna International.

Backed by the state-owned Russian bank Sberbank, Magna will finalise the purchase agreement of the majority stake in the next few weeks, with the deal expected to close before the end of November.

Under the deal, which in share terms at least mirrors an initial agreement struck three months ago, GM will retain a 35 per cent stake in the business with employees holding the remaining 10 per cent.

A number of key issues are still to be finalised to secure the binding agreements, including the written support of the unions involved – who represent a large portion of the 50,000 workers in mainland Europe and the UK – and a finalisation of a “definitive financing package” from the German government.

In announcing the deal this week, which came after a two-day meeting of GM’s board in Detroit, GM president and chief executive Fritz Henderson said GM would continue to “closely collaborate” with Opel and Vauxhall to develop and produce new-generation models, such as the Insignia medium-sized car and Astra small car.

“The hard work over the past two weeks to clarify open issues and resolve details in the German financial package brought GM and its board of directors to recommended Magna/Sberbank,” said Fritz Henderson.

“We thank all parties involved in the intensive process of the last few months – especially the German government – for their continued support that enables this new venture. I’d also like to thank the Opel and Vauxhall customers for their continued loyalty.”

Reports out of Europe said the decision was welcomed by German chancellor Angela Merkel, who had lobbied for the Magna bid in the run-up to an election on September 27.

The German government supported the Magna consortium over the other remaining bidder, the Belgium-listed investor RHJ International, with a promise of €4.5 billion ($A7.6 billion) in government guarantees if GM opted for Magna.

The Magna consortium, which will invest another €500 million ($A843.7 million) into Opel/Vauxhall, also involved Russian industrial giant and commercial vehicle manufacturer GAZ, whose president is former GM purchasing executive Bo Anderssen.

Significantly, the agreement maintains Opel and Vauxhall as a fully integrated part of GM’s global product development organisation, allowing all parties to benefit from the exchange of technology and engineering resources.

This is a vital consideration for GM’s small-car affiliates around the world, including Holden, which will build a version of the Opel/Vauxhall Astra-based Cruze small car from the second half of 2010.

GM said the new ownership structure constitutes a “new lean, efficient and independent organisation” for the Opel and Vauxhall brands, with the current portfolio of Opel/Vauxhall cars and the models in the pipeline remaining “a strong basis for future success”.

“GM operates many joint ventures around the world and has proven in the past that this business model delivers the right balance of independence, innovation and synergies,” said GM group vice-president of business development John Smith, who led the negotiations. “All parties will work hard to close the deal as soon as possible.”

In a joint statement, Magna International co-CEO Siegfried Wolf and Sberbank chairman and CEO Herman Gref said: “Together with General Motors, Opel employees and Opel dealers, the consortium will now work hard to lead Opel into a successful future.

“Additionally, the consortium is grateful to General Motors for the constructive atmosphere during the negotiations and to those parties which have provided their support for the consortium's business plan, including in particular the German government.”

Magna chairman Frank Stronach added that upon the successful completion of the acquisition Magna would put in place appropriate "firewalls" in order to ensure “a complete separation between its current auto parts business and Opel so that the confidential and proprietary information of its customers is fully protected”.