General Motors abruptly ended negotiations on the sale of its European unit, Opel, to a consortium of Magna and Sberbank, scuttling a deal that the Russian government hoped would help rescue its auto industry and further integrate its economy with the West.
The U.S. automaker’s board of directors voted late Tuesday in Detroit to scrap the sale, following seven months of heated negotiations in Europe and the United States.
The decision drew outrage in Germany, where many of Opel’s factories are located, after Chancellor Angela Merkel helped broker the deal for Magna and Sberbank to buy 55 percent in Opel and British unit Vauxhall for 500 million euros ($738 million).
The Russian government is “surprised” by the decision, said Dmitry Peskov, Prime Minister Vladimir Putin’s spokesman.
“The purchase was already approved by the Opel Trust, and now there is this board’s decision,” he said, adding that Magna, a Canadian auto parts maker, and state lender Sberbank would undertake a legal analysis of the situation.
Putin has personally supported the Canadian-Russian bid, saying in early June that the Opel deal “should be incorporated into the strategy” to develop domestic carmakers.
He has discussed the deal with Merkel several times and praised it during a July meeting in Moscow with the head of the influential IG Metall union, Berthold Huber.
“It’s a pleasant thing. … I hope it’s one of the first steps that will lead us to a real integration into the European economy,” Putin said after the September agreement.
GM’s announcement comes just a week before a key government meeting where a commission headed by First Deputy Prime Minister Igor Shuvalov will present its proposals for reforming the Russia car industry.
Peskov said the commission had been considering the Opel purchase, but that the government already had a plan for the auto industry, some details of which Putin announced at a government meeting late Tuesday (Story, Page 5). The commission, led by Industry and Trade Minister Viktor Khristenko and Economic Development Minister Elvira Nabiullina, is scheduled to meet on Tuesday.
Reactions from other Russian officials ranged from relieved to angry that the U.S. government-controlled auto giant had backed out of the deal.
“We have so many problems with domestic auto producers. Their future should be our primary concern,” Deputy Prime Minister Alexander Zhukov told reporters in Nizhny Novgorod on Wednesday after an opening ceremony for a bridge.
The city’s GAZ plant, controlled by Oleg Deripaska, was long seen as the frontrunner among potential industrial partners for Opel in Russia. GAZ had said it was ready to produce Opel models on its production lines, currently used for the unprofitable Volga Siber.
Oleg Morozov, a first deputy speaker in the State Duma from the ruling United Russia party, called the decision a “political rather than economic” move.
“I’m inclined to suspect that this didn’t happen without direct or indirect [U.S.] participation, and the motivation is very simple — to keep Opel in the sphere of political and economic influence of American business and American politics,” he told Interfax.
Morozov’s remarks indicate that the corporate decision by the board may put the U.S. government, which owns 60 percent of General Motors after its bankruptcy this summer, in an awkward position.
In June, President Barack Obama said GM executives would continue to make decisions for the company, despite receiving a $50 billion bailout.
But now some of those decisions have irritated both the German and Russian governments, which made major political investments to see the sale go through for Canada’s Magna and Sberbank.
The decision also flies in the face of Merkel, who met with Obama in Washington and made a historic address to the U.S. Congress just hours before the GM announcement. Merkel was a strong supporter of the Magna-led bid because it promised to keep job cuts in her country to a minimum.
GM Europe president Carl-Peter Forster said Tuesday that the company may close up to three plants and fire as many as 10,000 workers as part of the restructuring process.
German Economy Minister Rainer Brüderle called GM’s actions “totally unacceptable” and said Berlin “will get the taxpayers’ money back,” referring to a bridge loan provided by the government to keep the company afloat during months of negotiations.
GM owes Germany about 900 million euros, having repaid some of the 1.1 billion euros that it borrowed, Dirk Pfeil, a member of the Opel Trust board, told Reuters. The trust was established to keep Opel out of GM’s bankruptcy proceedings in the United States.
“We understand the complexity and length of this issue has been draining for all involved,” GM president and CEO Fritz Henderson said in a statement. “This was deemed to be the most stable and least costly approach for securing Opel/Vauxhall’s long-term future.”
“GM’s overall financial health and stability has improved,” giving it confidence to restructure the company without help from other investors, the statement said.
The sale has been discussed as a practically done deal since September, when the sides announced agreement on key issues. But U.S.-based GM officials had hinted that they were interested in hanging on to Opel and had deep reservations about Russian participation in the deal.
The Obama administration “was not involved with this decision, which was made by GM’s board of directors,” White House spokesman Robert Gibbs said in a statement Wednesday..
Opel workers also lashed out at GM, with the company’s works council calling a strike to protest the decision beginning Thursday, The Associated Press reported.
Klaus Franz, a representative for Opel’s workers, called GM’s decision detrimental to Opel plants, particularly three in Bochum, Kaiserslautern and Antwerp, Belgium, according to a statement posted on the web site of the IG Metall union. He demanded that the German government not grant GM the financial aid that it had promised for the Opel sale.
Berlin had promised 4.5 billion euros to help a potential buyer for Opel.
“The federal government would not tolerate blackmail, especially since there is an alternative with Magna,” Franz said.
Under the deal with Magna and Sberbank, Opel workers would receive a 10 percent stake in Opel in exchange for concessions on labor costs. The remaining 35 percent would remain with GM.
“Where GM is going to get the money to fund the Opel restructuring is still something of a mystery, as none of the money that it has received from the U.S. government may be used for overseas operations,” said Aaron Bragman, an auto analyst with IHS Global Insight in Detroit, Michigan.
Still, GM may have purposely been “delaying” the sale until it held a better financial position, he said.
Sberbank’s press office said it was preparing a statement but had no immediate comment when contacted by The Moscow Times. Wednesday was a state holiday in Russia.
Magna appeared to take the news in stride, despite having invested months into the negotiations.
“We will continue to support Opel and GM in the challenges ahead,” Magna co-chief executive Siegfried Wolf said in a statement. Magna “has been advised by General Motors that the GM board of directors has decided to terminate the sale process.”
Magna’s shares were trading up 7.9 percent in New York and 6.9 percent in Toronto on Wednesday morning.