GM walks away from Magna deal

Posted on 5 Nov 2009 by The Manufacturer

General Motors has scrapped plans to sell Opel/Vauxhall to Canadian car parts firm Magna.

The move, which will likely result in large job cuts in Germany and the UK, is in opposition to a decision made by GM earlier in the year to progress with the sale. According to GM the decision has been made due to an improvement in “the business environment in Europe”. Confirming the company’s intentions, GM CEO Fritz Henderson said that the decision aims to “secure the best long-term solution for our customers, employees, suppliers and dealers.”

Despite the statement, GM vice president John Smith, said he “envisaged” that around 10,000 jobs will be axed across Europe as part of a restructuring of Vauxhall and Opel. However he did not provide details of how this would impact specific countries or plants.

Union leaders responded to the latest development by saying redundancies were inevitable but pledged to work towards minimising the impact on Vauxhall’s UK workforce, which are largely based in Ellesmere Port and Luton. Tony Woodley, joint general secretary of Unite, said in response: “I have no doubt that whoever the owner would be, there will be major restructuring of GM operations. Inevitably some will go in the UK, but our task is to minimise the number of jobs lost and ensure that those who do go, go voluntarily.”

UK Business Secretary Lord Mandelson said the decision was a “major U-turn”, adding: “I am keen for very early discussions with GM over their plans for the business and how they will affect British plants and workers. I have always said that if the right long-term sustainable solution is identified, then the Government would be willing to support this.”

While the announcement that has been greeted by cautious optimism among some of the 5,500 workers employed by Vauxhall in the UK it has sparked anger in Germany. Analysts predict that two German plants could now close, with the loss of thousands of jobs, as a result of GM’s decision. German workers have begun walk-outs in protest at GM’s decision, while the German Government denounced the car giant’s behaviour as “totally unacceptable”.

The German government, which had backed the sale of Opel, demanded GM repayment of a 1.5bn euro ($2.2bn; £1.3bn) loan. German leaders and labour unions had favoured a sale, to Canadian car parts maker Magna, as the best way to save German jobs as it included a guarantee that no German factory would be closed.