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Cancelled Opel deal – a slap in the face for Germany

GM has backed out of selling its Vauxhall and Opel brands to a joint venture between Russia’s Sberbank and Canada’s Magna. German workers, who risk mass sacking, have started protests against the move.

The deal, only finalized in September, was reversed following a six-hour board meeting on Tuesday night. This, according to some, poses more questions than it answers.

“Now, the dangers really are what happens next,” said Howard Wheeldon, senior strategist at BGC Partners.

“GM clearly needs funding for its European operations, it can’t fund them from the US and this problem is, in a sense, heightened rather than weakened. Whatever occurs, GM needs additional funding to do that, whether it takes out jobs, whether it takes out costs – it needs government help,” he added.

Reaction from interested parties has been unequivocal, with Prime Minister Putin expressing surprise, and announcing his office will look into the legality of the move. Russia would have inherited much-needed technology and experience to rejuvenate its own ailing motor industry from this deal.

Germany Chancellor Angela Merkel has called GM’s cancellation “totally unacceptable”. The country has demanded repayment of a 2.2 billion dollar bridging loan from the German taxpayer. The money was controversial, in that it was meant to safeguard German jobs if the sale went through. Workers in Germany are protesting the decision.

According to Matthew DeBord, an auto industry journalist, the deal has caused much more of a blow to Germany than to Russia:

“It’s definitely something of a slap in the face to Germany,” he told RT.

What’s brought instability in Germany, however, has brought relief in the UK. Although jobs will still be lost, British unions are more confident about keeping both of Britain’s GM plants.

“We feel it’s a better deal for us. It can possibly secure more UK jobs than the magna deal would have done,” Paul Geary, a union representative for General Motors said.

“It’s nice that we will stay under the GM umbrella with people who we know, who we have worked with closely in the past and hopefully we’ll work closely with them again,” he asserted.

But not everyone sees the turnaround in such a positive light. Partick Fullick, founder and president of “Science Connections”, is among those with such an opinion:

“The significant thing is that it means that there is much less money available for Opel to invest,” he explained.

“That is going to have a significant effect on jobs in Opel companies, both in the UK and in Europe, so I think it’s bad news” he added.

In a statement, Business Secretary Lord Mandelson said the UK government would offer its support for an appropriate deal. Mandelson’s European counterparts are likely to follow suit if GM can come up with a plan that redistributes job cuts more evenly all over Europe. And those job cuts currently look like the only certainty.

At GM’s plant in Luton, the news that the sale to Magna and Sberbank won’t go ahead has been greeted warmly, unlike in Germany. But the future of this plant is by no means clear. GM will now restructure its European business, and some experts say this plant will close within 2 years, putting 14 000 livelihoods in jeopardy.

Read also – German Government, Unions Angry at General Motors. Opel workers plan protests