Opel: Deal or No Deal

　

It was never the first choice for GM to sell off its European hand Opel to Fiat or Magna or to anyone for that matter. Last few months GM has witnessed its one of the worst crisis ever which has not only almost claimed its existence but also in this period it made GM sold its iconic brand Hummer and Saab to almost unknown companies for the price of peanuts. When the economic hurricane has subsidized a bit, till then GM has lost its crown which was intact for more than three quarter of the century and became certainly a leaner if not a meaner organization.

GM sold its one European brand Saab to a tiny company Koenigsegg, a Luxury sports car manufacturer who has the presence in the Top 10 list of world’s fastest cars.
Well, another European unit Opel accounts for significant GM Share in EU market. If GM would have sold its share in Opel, definitely it would have been almost whipped from EU, not so pleasant situation for the automaker.


No doubt it was not the move which has been received warmly by everyone but with this decision GM has faced lots of criticism not from the industry but also from the government of Germany and Russia. But again, its business, where ethics always throws towel whenever it faces profit and greed heads on. This whole deal took a long time while seeing many ups and downs. Now even after GM declared not to sell Opel, condition of Opel has not become any clearer, in fact became a bit uncertain. Where Magna plan was not in the favor of laying off workers more than 2600 and without shutting down any of its plant, GM doesn’t make any such kind of promise. No doubt Magna was also German’s choice for this reason. So very obviously after turning its back from the deal GM management has been told to return the bridge loan of 1.5 billion Euro till the end of this month. Hopefully GM may manage to return it since it is now become Government Motors and it has the support of the US treasury, if they justify their move. Meanwhile Russian Prime Minister Mr Putin didn’t say much about the situation but his disappointment was pretty evident from his statement that he has learned his lesson from this deal. One can only hope that the economical relation between Cold war rivals is going to be unaffected with this U-turn. GM CEO Henderson already made an apologizing statement but sure it’s not going to sooth their temper any sooner.

　
Well, these all were the situations considering the bidder side in the Opel deal, Magna and Sperbank. Now lets see GM’s stand. Only future will say this step was good or bad but one thing for sure in this economic turmoil situation GM was not in the drivers seat while making the deal. GM has already sold its muscular Hummer to a Chinese heavy machinery company for some $200m odd value, which was even less than half of expected value. Surely GM has to improve its fuel economic image and while Hummer was not a profiting hand, it has to go. Another was Saab which was hardly ever profitable since it has been acquired by GM. So its deal also didn’t hurt much to GM. But Opel story is completely different. Opel captures a significant percentage of European market share and has some very good model in its kitty. Also, build on the Volt platform Ampera is supposed to launch in coming year as an Electric vehicle. Here was one of the major concerns for GM with this deal, loosing its grip over its intellectual property which not only accounts for numerous patents and technologies but also they overlap significantly with GM’s core technology these days. No wonder GM management was not able to digest this and also they were not finding any suitable way out of this issue.

After the elimination of Fiat from the bidding, it was taking way too long for Magna to close the deal and meanwhile economy and Auto sector has started to see the light in the tunnel. Cash for clunkers, stimulus packages, and massive cost cuttings have shown some positive signs and almost all Auto manufacturers and major Auto markets data saw north after long time. Ford has already posted its long awaited billion dollar quarterly profit followed by Toyota, performing way better than wall street prediction of losses. GM was also not left behind in riding the wave of change as it has reported after long the growth in the sell percentage of its car in North America whereas it continues breaking all self made previous records in China, world’s latest largest Auto market.

Seeing these positive signs GM has changed its mind to sell Opel. Off course it has shattered the dream of Magna to enter the auto sector as OEM. But well again, win for some is the loss for some.

Now as GM has retained Opel, this is the easy part. Now hard part comes which is to restructure the company and making it profitable unit. After breaking the trust of the government and the employee, it’s not going to be an easy task for the management. No doubt GM has put its veteran Bob Lutz to come up with a plan. Also, the most successful GM employee in current time Nick Reilly, president of GMIO is going to handle GM European operation replacing Carl Forster from the Opel top position who is supposedly moving to manage Jaguar Land Rover owned by Nano famed Tata Motors. Well this addition and subtraction at top slot in not a Herculean task for the company but the company will have acid test when it will come to manage at lower level considering workers layoff and huge cost cutting is inevitable with chances of some plant closure. In addition to this workers and government are already unhappy. But considering the success story of Nick Reilly its going to be interesting to see how they make their plan viable.

Well the outcome of the whole drama may get clear after some time but lets just hope for a while it will come positive for the former world Auto champion. The whole Opel case may turn around as sweet for some or sour for some but for sure its going to be a hell of a case study in Auto Sector.