GM Opel sale takes turn

DETROIT

General Motors Co.’s board began a meeting poised to sell most of Opel to Magna International Inc. but scrapped the deal after concluding that the money-losing unit could be saved, people familiar with the matter said.

Directors reached that decision after talks that started at a Nov. 2 dinner and ended Tuesday, said one of the people, who asked not to be identified because the discussions were private. Chief Executive Officer Frederick A. “Fritz” Henderson went into the session expecting a sale, people familiar with the deliberations said.

The reversal angered German officials who backed the sale to a group led by Magna and Russian lender OAO Sberbank as a way to save jobs at Ruesselsheim, Germany-based Opel. A senior leader of Chancellor Angela Merkel’s party voiced “serious concerns” about the unit’s future.

“It’s the worst decision for GM,” Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen, told Bloomberg Television. Opel will “have fewer chances to survive” as part of the automaker, he said.

The board, which was remade after the automaker’s July 10 bankruptcy exit, concluded that Opel was operating better than planned and was important for the company’s future as a source of small-car engineering, John Smith, GM’s lead negotiator, said Wednesday on a conference call.

Also shaping the directors’ decision was their growing understanding of GM’s operations, a person familiar with the decision said. The vote to keep Opel and restructure it was unanimous, another person said.

The board, which includes Mr. Henderson, and management also agreed on a plan to run Opel without emergency aid from Germany, which put up $2.23 billion, people said.

Hours before the decision, Carl-Peter Forster, GM’s CEO of European operations, underscored management’s expectation of approval for a Magna deal when he said in Berlin the sale should be done in December.

“I won’t comment on what the expectations were going into the board meeting,” Renee Rashid-Merem, a GM spokeswoman, said Wednesday.

Directors led by new Chairman Edward Whitacre Jr. initially reviewed the bids for Opel in August, at their first meeting. The sale accord was announced in September after the automaker, Magna and Germany settled disputes over Opel’s access to GM intellectual property and financing. GM had said earlier that a competing bid from Brussels-based investment firm RHJ International SA was “simpler.”

“It was a close call all the way along, and I suspect it could also be said going into the board meeting, there was uncertainty,” GM’s Mr. Smith said. “It’s a big decision. It’s a complicated business.”

GM is seeing “some supportive” reactions from governments in the U.K., Poland and Spain, possibly leading to the creation of a finance syndicate, to help bolster Opel, he said.

While Tuesday’s board decision validated GM advisers’ August recommendations to retain Opel, members of that team were frustrated about spending time on a Magna deal they perceived as a political solution, two people close to the situation said.

Directors went into their meeting without knowing whether Ms. Merkel’s government would help prop up Opel if GM kept the German unit, the people said. Two German state officials said Wednesday that more public assistance might still be available.

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