GM's U-Turn: Gutsy or Myopic?

Last Updated Nov 4, 2009 8:21 AM EST

GM's decision to hang onto Vauxhall has naturally made the marque's 5,500 UK workers happy. But has GM made the right decision?

Tony Woodley, joint leader of Unite (the union), said there was logic in selling off the two marques and GM's CEO, Fritz Hendrseon, said GM's health had improved since the initial negotiations, giving the business the confidence to restructure, rather than sell off its European business.

Breaking up GM's business and selling its Opel operations to Russian-financed Canadian car-parts company Magna might well have cannibalised GM's own car sales.

By retaining Opel and Vauxhall, GM gets to keep a toe-hold in Europe, and the Continent's emerging markets, an important source of new business as UK car sales rely heavily on government intervention.

But the company will still need to restructure heavily (estimated costs come in at £2.76m, less than what Magna wanted in government loans and guarantees) and may or may not be a friend to Germany, despite how much money Germany's government spent trying to secure the Magna deal.

Restructuring will mean further and cuts jobs and the UK will still face uncertainty as to how many will go from the Bedford and Cheshire operations. Business secretary Peter Mandelson's said to be planning to extend up to £400m in loan guarantees to secure jobs, according to The Times.

As Germany's experience demonstrates, GM's board won't be swayed (and why should it?) GM says its new structure will include "meaningful contributions" from all its European markets. But what's to stop it moving ops a little to the east? (And is GMUK chairman Bill Parfitt's departure announcement today just a coincidence? He was only made chairman last year.)