GM yanks back Opel, jerks around German government

Fritz Henderson, the president and CEO of General Motors, flew to Germany this week to follow up on GM’s surprising — nay, shocking — decision to take Adam Opel and Vauxhall Motors off the auction block, just weeks after designating Magna International and Sberbank as the preferred bidders for majority ownership of those European operations.

Magna/Sberbank emerged as not only the preferred bidders of the German government, which did all it could to push the transaction forward with €1.5 billion (about $2.24 billion) in bridge loans and other incentives. The workers of Opel/Vauxhall also were looking forward to new corporate ownership, as well.

After months of consultations and negotiations, GM essentially said: Fuggedaboutit! One immediate consequence of the decision to call off the sale was the resignation of Carl-Peter Forster, GM group VP and president of Opel Europe, who was another strong backer of the proposed sale to Magna/Sberbank. GM today announced that EVP Nick Reilly, the president of GM International Operations, will temporarily take charge of Opel/Vauxhall while GM seeks a new chief executive for Europe.

GM set in motion the proposed sale of Opel/Vauxhall last spring, when the Detroit-based automaker was facing its darkest days. The company was given two months by the Obama administration to put its financial house into order on its own or face a government-supervised bankruptcy reorganization. The federal government lent about $50 billion to GM to keep the lights on. The company ultimately did file for Chapter 11 and completed its reorganization in less than six weeks. Now, as a privately held company with the US Department of the Treasury as its majority shareholder, GM is no longer on the financial brink of disaster. Chapter 11 was a harsh rescrubbing for the company (ask anyone who works at NUMMI or Saturn), but GM got through the process to see the faint glimmers of hope as the recession ends.

The big difference between now and last spring is the board of GM, most of which are new directors put in place by the government’s auto task force, including former AT&T CEO Ed Whitacre, the chairman, who became a pitchman in GM’s “May the best car win” TV commercials. With GM’s situation less dire than earlier this year, it became more advantageous to GM’s global strategy to keep full ownership of its European operations, rather than a 35% equity stake.

There will be hard feelings all around because of this decision for some time to come. The offended parties will ultimately have to reconcile themselves to Michael Corleone’s famous counsel: “It’s not personal, Sonny. It’s strictly business.”

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Photo courtesy of General Motors Company.