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In Surprise Move, GM Scraps Plans To Sell Opel

A worker assembles Opel cars in Russia's Kaliningrad exclave.

A worker assembles Opel cars in Russia's Kaliningrad exclave.

(RFE/RL) -- U.S. automaker General Motors (GM) has scrapped plans to sell its European division Opel, citing an improving business environment.

In a surprise announcement from its headquarters in Detroit, the company said it will keep Opel and restructure it, instead of selling a majority stake to Canadian auto-parts firm Magna and its Russian partner, Sberbank.

The unexpected reversal has been received with incredulity from the both the Russian and German governments.

Dmitry Peskov, a spokesman for Russian Prime Minister Vladimir Putin, was quoted by Interfax as saying the decision had caused "astonishment" in Russia, where the government had viewed the deal as an opportunity to bring Western technology to the country's struggling auto industry.

Noting that GM's present business in Russia is "significant," GM's board of directors did suggest that it would resume work with Russia's automaker GAZ, which was expected to build Opel cars in Russia had the original deal gone through.

Peskov said Magna and Sberbank would be reviewing the legality of the GM decision.

German Concerns

Anger was also running high in Germany, where officials had planned to provide Magna with $6.7 billion in loans designed to provide continued jobs for Opel's German workers.

Germany's Economy Minister Rainer Bruederle called the GM switch "totally unacceptable, and said Berlin will want urgently to see GM's restructuring plan to revive Opel, which employs 25,000 workers in Germany.

Roland Koch, head of the Hesse state government, where Opel has its biggest plant, said he is "shocked and at the same time angry" that seven months of effort to find the best formula for Opel's survival has been cast aside.

During that time, GM and the German government had been negotiating with Magna and Sberbank. They reached a preliminary agreement in September that Magna would take a controlling share in Opel, and the German government would provide financial aid totaling $6.7 billion.

This would have secured most of the jobs in German factories, although neighboring European countries, including Belgium and Spain, complained that they would thereby bear the brunt of the inevitable job-cutting.

The Opel auto workers are also angry at what they foresee as more months of uncertainty, probably involving heavier job cuts than under the Magna plan. One employee arriving for the early shift at a plant in Bochum said he had no idea what the future holds.

"It's not good. I don't know what will happen in Bochum if Magna does not take over," he said. "We must wait and see."

Opel's workers council has called for strikes at plants across Europe to protest GM's decision to cancel the sale.

The powerful IG Metall union said workers at Opel's four German plants will stop work on November 5, followed by similar moves on November 6 at other Opel locations in Europe.

Restructuring Money

In Detroit, GM's board of directors says it has a $3 billion restructuring plan for its European subsidiary, but has not disclosed any details.

A statement said the decision to retain Opel was made because of an improving business environment, and because of the brand's strategic importance to GM.

Sales of GM vehicles on the U.S. market were up in September for the first time in two years.

Auto industry analysts say Opel's operations in Germany have been the center for developing vehicles that are crucial to GM's effort to achieve better sales of more fuel-efficient cars. Several Chevrolet and Buick models are already based on Opel models, and more will follow.

But it's not yet clear where GM will get the $3 billion to finance its restructuring in Europe. GM has lost more than $80 billion in the past four years, and has had to accept some $50 billion in aid from the U.S. government.

with agency reports