03 September 2009

GM's CEO Fails to Win Support for Magna Deal

By The Wall Street Journal

General Motors Co. executives failed to win board backing Friday for their plan to sell a majority stake in its Opel/Vauxhall division to a group led by auto supplier Magna International Inc., according to people familiar with the situation.

The board also has reservations over details of a German government plan to back a sale with 4.5 billion euros in guarantees.

German officials have given strong backing to the Magna-led consortium since choosing them as a preferred partner in May. But this has left GM board members uneasy about the sale process.

GM said Friday that the board had made "no decision" on Opel, but their action highlights the new level of scrutiny facing executives long used to more passive intervention.

Chief Executive Frederick "Fritz" Henderson and fellow executives backed the Magna-led consortium, which also included Russia's Sberbank and auto maker OAZ Gaz. But GM's board said a competing offer from Belgian investment group RHJ International SA should be taken more seriously, these people said.

Mr. Henderson's management team has committed to doing work on how to approach the future of Opel and its sister Vauxhall unit, two people said. The board is seeking more clarity on GM's strategy in Europe if it accedes control of Opel while retaining a minority stake.

In addition, members want more specific details of Germany's commitment to finance Opel. One person involved in the matter said GM's management team has been pressed to take more time to craft a more favorable scenario.

Opel, long a crucial sales and product-development unit for the Detroit auto maker, is seen as a critical cog in GM's attempt to rebuild as a global player in the auto industry.

The Magna-led bid has received widespread backing from German politicians, who are expected to comment on GM's move early Saturday. Magna declined to comment.

The Opel/Vauxhall business lost $2 billion in the first quarter of 2009 and is being run by the trust with 1.5 billion euros in German government loans. A final decision on any sale will be taken by the trust in coordination with European and U.S. authorities.

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