General Motors’ board of directors has wisely rejected a management pitch in favor of Magna’s bid for Opel and will take some time to assess Opel’s future. It’s the right decision. GM’s management was being railroaded by the German political and labor union establishment into accepting a bid from Magna and its Russian partners, including Sberbank. The Germans preferred Magna, as so many politicians and union leaders were more than happy to say publicly, because the bidder pledged to preserve Opel jobs. This despite the fact that Opel – like just about every auto maker in the world operating in a lousy economic environment – would surely need flexibility to trim jobs if that would contribute to its long-term survival. But the Germans had leverage – no Magna, no government financial assistance. I haven’t taken sides in the bidding war between Magna and private equity rival RHJ International. Without being privy to details of each party’s offer or, for that matter, Opel’s internal finances, few would be able to determine which group would be the European car maker’s better custodian. But I’ve long felt, and have previously written, that the terms of the Opel-sale debate in Germany – jobs, jobs, jobs – were spurious and unhealthy for Opel and its workers, whose employment hinges on the company’s longevity. It’s back to the drawing board for GM’s post-bankruptcy board, Opel and Germany. That’s a good thing. And if Magna prevails in the long run, one can now reasonably hope it will follow a more considered process and public discussion. By the way, WSJ colleague John Stoll reports that the board’s decision runs counter to the pro-Magna recommendation of CEO Frederick “Fritz” Henderson and his management team. It’s a sign of the “new” GM that the board has the wherewithal to say “no” to its CEO – and it bodes well for the auto maker’s future under 61% U.S. government ownership. In its previous, stodgy incarnation, GM’s board seemed to march in lockstep with management, even when the CEO and his team could have benefited from some push-back from savvy directors. As frustrating as the prolonged Opel sale process is, this particular bump along the road toward a lighter-weight GM without some of its overseas assets is heartening.
9 Comments to GM’s Board Makes Right Decision On Opel
The Old ColonelAugust 21, 2009
Gabriella
You don’t know what you are talking about, as usual. Magna is a first class corporation that knows the automobile industry. RHJ owning Opel is as smart as Cerberus owning Chrysler. Which of course now is owned by UAW… losers. If anybody can mess up a smart move, it’s GM. The new board has no more wisdom than the old board.
Gabriella SternAugust 21, 2009
As I said, I’m not for or against either bidder (as you note, private equity has a poor track record running auto makers.) I simply want to see a more considered sale process and a more intelligent public discussion in Germany. Keep the comments coming, please. G
Danny K.August 21, 2009
My turn to take a shot at the reporter: Given the fact that there is a total of “ONE” private equity firm that has attempted to run a car company, how can anybody say with a straight face that private equity firms have a poor track record? You guys criticize the GM board for being management’s lock-step rubber stamp, but has anybody thought to themselves that innane repetition of the former statement as some sort of truism is no different?
That said, and it pains me to say this, but I think GM needs to continue its presence in Europe. Given all the money GM has already received from the government, what’s another $5 billion? Seems like a drop in the bucket to me. Get some more money from Uncle Sam and do what it takes to make Opel profitable. I think GM also needs to put everyone (including the German government) on notice that it is no longer running a jobs program for union workers.
I don’t know what to make of Fritz and his crew. On the one hand, Fritz ran Opel and (like Dieter Zetsche and Chrysler) was hailed as the architect of a short-lived turnaround. You would think that he has a good sense of whether Opel is worth salvaging. On the other hand, this is the same guy who killed a repurposed Pontiac G8 as a Chevrolet (which makes all kinds of sense), saying he wasn’t a fan of badge engineering, yet was on board with a rebadged Saturn Vue as a Buick (which was killed). I still don’t have a lot of faith in those number cruncher guys allowing product people do to their thing.
Dan WesterbeckAugust 21, 2009
I know Ed Whiteacre and Rob Krebs from their previous service on the BNSF RR board (where I worked). I also know they are both astute, analytical, hard nosed, and doubt they will be stampeded by political considerations. They will do the right thing for the shareholders–we the US taxpayers.
SkepticalAugust 22, 2009
Isn’t Ford in an advantageous position, apparently not in jeopardy of losing their European foothold? Maybe this isn’t about jobs, but about prying away a proud German company from its ugly American oppressor. The Magna deal would mean no return of Opel into the GM fold forever.
Gabriella SternAugust 22, 2009
Yes, of course you’re right that we shouldn’t tar the entire private equity industry for one firm’s (Cerberus) failing with Chrysler. Which is why I think it was wise of the GM board to take a deep breath and take a fresh look at the Opel situation. Thanks for your thoughtful comment – keep them coming, please! Gabby
Ed GivanAugust 22, 2009
We should not judge anything by Cerebus. Cerebus had Nardelli running it and had the UAW as his copilot. That was a certain recipe for disaster. Nardelli ran Home Depot into the ground, and hauled off hundreds of millions in the process. The UAW has been responsible for wrecking the US auto Industry. Maybe there are some honest private equity folks who will not have to bow to the unions and can make a go of Opel.
StrategemAugust 22, 2009
GM had an offer to sell all of Opel in February for more than a billion dollars cash and turned it down. GM could do a deal Monday morning that would still keep Germany sweet while not having to jump into bed at all with the Russian ensemble, and without “Leonard”.
August 21, 2009
“The Germans preferred Magna, as so many politicians and union leaders were more than happy to say publicly, because the bidder pledged to preserve Opel jobs.”
You are forgetting that they are providing the guarantees, which without it Opel would not survive. If you were to put the money into or guarantee a deal, wouldn’t want to decide how your money is spent?