VW and Chinese ‘in talks to buy Vauxhall/Opel’ from GM

GM is considering selling its loss-making European operations, it emerged tonight. If it goes ahead and severs ties with GM Europe, the General would cede control of Vauxhall and Opel, the second biggest car brand in the UK.

And in another extraordinary twist, CAR has confirmed that top-level talks have been taking place between Volkswagen and the German government, which is keen to avoid Opel falling into foreign hands.

Chinese car makers are circling but Chancellor Angela Merkel, who has close connections to Volkswagen chief Martin Winterkorn, would prefer VW to step up to the plate as a potential buyer than a Chinese brand.

German media, including Spiegel and Auto Bild, reported that Opel and Vauxhall were being put out to dry by GM, whose patience had worn out with its loss-making European arm. This evening Opel chief exec Karl-Friedrich Stracke was quick to dismiss the story as speculation, but CAR has spoken to senior staff in Germany who confirm that talks have taken place.

Opel was very nearly sold to a consortium led by Magna and Russia´s Sberbank in 2009 as GM sank towards bankruptcy. But at the eleventh hour, the US and Canadian governments opened their coffers and saved Detroit´s former number one with an unprecedented cash injection. Opel and Vauxhall remained part of GM through its Chapter 11 bankruptcy reorganisation, and avoided the cull which divested New GM of Saturn, Pontiac, Hummer, and Saab.

However in spite of a commendable line of new cars, cost cutting measures and sales incentives, GM Europe continues to lose money - $400m in the third quarter, even as its post-bankruptcy parent firm in Detroit managed to post a $3.2bn profit. With a strengthening small car development capability in Korea, alternative powertrain and crossover vehicle development in the US and low-cost manufacturing through Asia, GM could divest itself of Opel/Vauxhall and attack the volume market with its Chevrolet brand.

The factors favouring a VW purchase are less to do with motor industry synergies as political implications of Opel’s sale. The US government, which remains a GM shareholder, is open to the idea of a sale of GM Europe to Chinese interests.

The Chinese government would gain from a major established European manufacturer, side-stepping the decades of brand-building and gathering of intellectual property required for the nascent Chinese industry to establish itself in Europe and globally. This would fit with the consolidation of the domestic automotive industry and rapid gain in ability sought by leading political figures in China. For GM in the short and medium term, it would be a profitable exercise.

But when news of these ambitions reached the German government three weeks ago, German chancellor Merkel contacted VW chairman Winterkorn. Merkel perceives the possible sale of Opel as being of key national interest, and does not wish the future of a major employer to fall into limbo as it almost did in 2009. VW has the financial clout to close the deal – it is sitting on a 20bn euro kitty - and it would provide a home-team solution in the face of a possible Chinese acquisition of Opel.

From GM and VW, one cannot expect anything but more or less soft denials. The Chinese play the cards even closer to their chest, and Berlin is of course equally unwilling to put its underlying concerns into words.

But even by reading between the lines it soon becomes clear that something
major is about to happen in the German-American auto landscape. No, we don´t know yet exactly where lightning will strike and when. But it seems obvious that after a short consolidation phase, Vauxhall and Opel is again facing a period of uncertainty and a possible change of ownership

By Georg Kacher