GM’s board has decided that a great, global auto maker really ought to be, er, global. It will keep its Opel and Vauxhall auto-making businesses in Europe. The board switcheroo is a poke in the eye to Germany’s political and labor leaders, who advocated selling Opel to a consortium led by auto supplier Magna International; jobs were the issue, and the German establishment believed Magna would save more of them. And of course it’s a blow to Magna’s ambitions to become an auto manufacturer (not to mention the murky aspirations of its Russian partners.) GM’s board was always conflicted about its original decision to sell 55% of Opel to Magna; directors knew that exiting Europe would effectively narrow GM’s opportunities for many years to come. Yet in the first go-round, the board couldn’t unite around the concept of spending billions of dollars fixing an enfeebled Opel. GM had only recently emerged from bankruptcy protection and was still part-owned by the U.S. government. What changed? Well, Germany’s problematic subsidy pledges to the Magna group spurred the European Union’s antitrust regulator, Neelie Kroes, to take a hard look at the deal – and it ultimately landed back with GM for reconsideration. The passage of time allowed GM board members to take stock – they saw a gradually strengthening auto maker, they regained some confidence in GM’s prospects – and – voila! – Opel (and U.K.’s Vauxhall) will remain in the GM family. Inside GM, the dynamic is quite interesting – CEO Frederick “Fritz” Henderson had originally recommended selling Opel to Magna, according to my WSJ colleagues. His board seems to have nudged him in their direction. These events underscore Henderson’s relatively tenuous position as a holdover from the “old” GM contending with a feisty new board of directors determined to remake the company into something vital and long-lasting – and, yes, global.
11 Comments to GM Does The Right Thing
BillNovember 3, 2009
It’s interesting that this decision was announced the same day that Chancellor Merkel addressed Congress.
It’s about time some business logic prevailed in the American corporate world. Maybe, just maybe, they’ll junk the quarterly accounting system and start thinking about their long term futures once again.
Hopefully all the financial whizbangers focused on their own pocketbooks will soon be flushed out of the system.
Daniel MullenNovember 3, 2009
GM made a decision which it will come to regret. While Magna, with the GAZ/Sberbank ballast, was not the ideal partner, there were other options for Opel. German sales volume will be down 20% or more in 2010, and the Opel and Vauxhall brands continue to be damaged by GM USA management. Detroit likely will want to use Buick as the new Euro branding, and keep the design center and some facilities while pushing the rest of the product into China.
David GravesNovember 3, 2009
Seems like there’s is some value in the engineering resources inside Opel–look at the Buick Lacrosse, with European, Chinese and US expertise working on a platform that first saw the light of day at Opel.
Joseph P. HillenburgNovember 3, 2009
The fact of the matter is that GM needed Opel’s engineering talent. This will make things rougher for a while, but they need Opel to have any chance at future product development.
Danny K.November 3, 2009
Gabriella: These are good signs that the once sleeping giant has awakened. I recently saw an interview with Mike Reuss (linked on fastlane.gmblogs.com) and I was thoroughly impressed with the man, yet walked away scratching my head. How could a company with so many talented and passionate people find itself in the current fix? There must be something severely dysfunctional in that company to be keeping them from being a world-class competitor. They have great designs now. Let’s hope the same passion and talent can be directed at making their cars world-class in durability.
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Consigliere hon. LedwinkaNovember 4, 2009
GM is right, Opel is much better in product (95%)of what is expected by the market, vs. US GM product (37%).Better in production Europe (75%)vs. US GM at (45%). If market pics up 2010 restructuring will be easy, and all workers and Germans are willing to support.
In recent years Opel has been burdened by GMs policy to withdraw money, investment and , research, that is why we hoped for FREEDOM !
[...] tut das Richtige“, titelt das Wirtschaftsblog „Randomly Noted“ von Dow Jones Newswire . Die unerwartete Wandlung des Verwaltungsrates sei eine Ohrfeige für deutsche Politiker und [...]
All fine and good. The offer made no sense except for the buyers who planned to loot the company with German government money. But what does GM have to offer, as a car maker? Really? The best they can do is to sell themselves to Renault-Nissan or VW or something like that to get their hand on decent products.
I am probably missing something, of course – what do I know? In the early 90s I thought the one computer company to watch was NeXT. I was wrong by a decade and a half.
November 3, 2009
Its the right thing to do. Opel provides small cars, engineering services, a european foot, export prowess, etc. It was unbelievable that GM would sell it. It also real stupid to sell Saturn. And Pontiac has the Vibe, which is a Toyota Matrix knock off,
but, get great fuel economy, and is a great car to drive. Raise the price of gas and small cars will sell like hot cakes. But, that would be too logical, and neither Democrats nor Republicans have the kahones to do it. Anyway, I’m glad GM is keeping Opel.