Opel’s Fate May Not be Decided Today
By Chris Haak
09.08.2009
The fate of GM’s Adam Opel GmbH European subsidiary may be decided either today or tomorrow during GM’s scheduled two-day meeting of its board of directors – but a decision in that timeframe seems to be increasingly unlikely.
As followers of this continually-evolving situation may recall, GM transferred Opel’s and Vauxhall’s assets to a separate company controlled by a trust. The trust was 35% controlled by General Motors, 10% by Opel employees, and 55% by the German government. In February 2009, GM came to a tentative agreement to sell a controlling stake in Opel and Vauxhall to a Russian -backed consortium led by tier-one supplier Magna International, Inc. The German government agreed to provide financial assistance for the deal with Magna (because Magna was likely to retain most of Opel’s German employees), but as always, the devil is in the details.
GM later re-opened the bidding process, which resulted in three preferred bidders: Magna, Belgian investment firm RHJ, and China’s Beijing Automotive Industries. Germany cried foul, stating its preference that the deal with Magna proceed and refusing to finance another transaction. Beijing Automotive Industries’ offer was later not accepted because of intellectual property issues, and many similar issues are sprouting up as GM reconsiders Magna’s offer.
Last month, GM’s management presented a proposal to its newly-reconstituted (and apparently newly-assertive) board of directors to sell Opel and Vauxhall to Magna. In a surprise twist that almost never would have occurred with the old GM, the board delayed a decision on Opel’s fate, and instructed management to go back to the drawing board, and to also consider raising the financing to just keep Opel.
Aside from egos and politics in fierce competition here (Germany’s elections occur on September 27 – I’ve never in my life known more than a month in advance when another country’s elections would be held before this time), there are hugely different competing priorities at play. Germany – and its government, which is up for re-election – wants to preserve as many German jobs as possible. Magna (and its automaker partner, Russia’s GAZ) wants access to Opel’s very good platforms and valuable intellectual property. GM rightfully wants to maintain a significant presence in Europe (should it continue to aspire to be a global automaker) and most importantly, to retain undisputed rights to its intellectual property. GM is trying to sell Chevrolet-badged cars in Russia, and literally could find itself in competition with its former subsidiary in Russia, should that technology transfer to GAZ.
Pesrsonally, I’d love to see GM come up with a way to keep Opel. Many of its current and near-term vehicles are underpinned by platforms developed by Opel’s engineering in Rüsselsheim, Germany (such as the Chevrolet Cruze, Chevrolet Volt, Buick LaCrosse, Buick Regal, Chevrolet Orlando, and others). Losing Opel and its engineering talent would be a big blow to GM’s aspirations to build excellent midsize cars in the future; its small car engineering abilities in Asia hasn’t exactly been instilling a lot of confidence with me after duds like the Chevrolet Aveo and other Daewoo-engineered flops.
Nobody knows what will happen in this situation, but if I had to place a bet, I’d bet that after the German elections, GM will mortgage its Asia-Pacific (China) operations in a bid to save Opel, the other countries in which GM has Opel operations (Spain, Poland, Belgium) will chip in a billion or two USD, Opel’s German workers will moan and complain about not wanting to return to the US-based corporate mothership, and Opel will continue to roll out excellent new vehicles like the Opel Insignia and forthcoming Opel Astra.
Meanwhile, the hands-on assertiveness of GM’s board (formerly known in some circles as the “board of bystanders”) and the accountability that it expects of management is a breath of fresh air. Management by fear may not be a good tactic, but installing accountabilty and high expectations certainly is.
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