Thursday, November 5, 2009

Not For Sale: GM to Keep Opel/Vauxhall - Car News


GM decides that it doesn’t have to sell its remaining European brands to stay alive.
Citing an improved business climate in recent months and the importance of Opel—and its U.K.-based Vauxhall twin—General Motors has decided to take the “For Sale” sign off its European operations. The company began exploring selling off the two brands when it began to receive U.S. government funds about a year ago.

"GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable consideration," president and CEO Fritz Henderson said in a press release regarding the company’s decision to keep the brands. "We understand the complexity and length of this issue has been draining for all involved. However, from the outset, our goal has been to secure the best long-term solution for our customers, employees, suppliers, and dealers, which is reflected in the decision reached today."

The press release continues: “While strained, the business environment in Europe has improved. At the same time, GM's overall financial health and stability have improved significantly over the past few months, giving us confidence that the European business can be successfully restructured. We are grateful for the hard work of the German and other EU governments in navigating this difficult economic period.”

Given the months of effort that went into setting up the ultimately unsuccessful sale, as well as all the regulatory hemming and hawing that went along with it, this wordy chatter doesn’t seem that out of place. But it sounds like a long-winded way of saying that GM couldn’t settle on the terms of the sale. The company likely decided that it would be more beneficial to beg for debt forgiveness from certain European governments than continue to gush money while trying to unload Opel and Vauxhall.

Tangible Benefits

In any case, there are tangible rewards for America in GM’s retention of Opel/Vauxhall. For one thing, it will keep some of GM’s distribution channels for Cadillac alive in Western Europe. For another, Opel-led engineering can be credited for the impressive road manners of the global mid-size architecture that has spawned the 2010 Buick LaCrosse and the upcoming 2011 Buick Regal—the latter more or less an Opel Insignia with a Buick grille.

Just as important, GM would have retained a 35-percent stake in the business had the sale gone through, and thus would still have to fund some engineering for future products regardless of who owned the remaining share. GM’s brass surely concluded that it makes more sense to keep the benefits of such expenditures to itself, rather than let the new owners get it at a reduced rate.

Finally, you can bet that GM could keep using Opel and Vauxhall as outlets for niche products that otherwise might not exist without critical sales volumes. Case in point, the upcoming Opel Ampera, the European version of the Chevrolet Volt, a car that could boost GM’s esteem in the fuel-economy-and-emissions-obsessed EU, as well as provide additional volume for a vehicle from which GM will struggle to derive profit.

Of course, it remains to be seen if GM will be able to navigate the labyrinth of issues that lie before it in Europe, including the sizable restructuring of Opel/Vauxhall’s operations and the painful cutbacks that go along with it. But we think it’s a positive that GM is keeping the operations in the fold, especially because it will help the company produce the products that it needs in order to regain its health.

source: caranddriver