Auto drama

Although the official reaction in Berlin on Wednesday was one of shock and surprise, the signs were present all along that General Motors did not want to sell a controlling stake in Opel to Magna.

Throughout the torturous negotiation process, underway since February, GM executives had said they were concerned about losing access to technology and vehicles under development at the Opel design center in Ruesselsheim.

In August, GM's management even indicated that it preferred a rival bid from the Belgian private equity fund RHJ that would give GM the option of repurchasing Opel - but then the German government said it would not finance such a deal.

"I am surprised only in that I thought [the deal] was too far gone," said David Bailey, a professor at Coventry Business School in Britain. "GM has never been happy with the deal."

General Motors' future hinges on Opel

By holding onto Opel, General Motors is pinning its future to the small car platform under development in Ruesselsheim, said CSM Worldwide analyst Mark Fulthorpe. A deal with Magna would have separated GM from those designs after the newest models are introduced.

"We all thought this was a stumbling block to the deal, because Ruesselsheim was so key to the development of the global Epsilon Delta platforms," Fulthorpe told Deutsche Welle. "So much intellectual property resides there."

Further, Magna's deal was financed by the state-owned Russian Sberbank and many observers believed that Magna would have transferred GM technology to Russian carmakers, strengthening potential rivals in a market GM sees as essential to the company's future, said business professor Bailey.

Government-backed scrapping bonuses that encouraged consumers to replace older cars with new models have supported sales throughout Europe and the United States, along with the emerging economic recovery, have also emboldened General Motors. On Tuesday, GM announced that sales in the US had risen for the first time in 21 months.

"Clearly GM thinks that their financial position is such that they can afford to restructure GM in Europe," said Bailey. In a statement issued Tuesday evening, GM estimated restructuring Opel would cost three billion euros ($4.5 billion) - far less than the 4.5 billion euros Magna said it would require.

European opposition helped sink the deal

Germany's decision to underwrite the sale to Magna through government loans also raised problems that were becoming apparent to all involved in the negotiations.

Factories in Belgium, Britain and Spain were targeted for closure or job cuts, leading governments in those countries to accuse Germany of subsidizing the protection of German jobs at the expense of their own.

The European Commission stepped in and agreed that Germany could not finance a loan package that favored Magna's plan, which weighted job cuts outside of Germany more heavily, over the plans of other buyers.

The Commission's decision gave cover to General Motors to hold Opel, said Bailey, because now the German government will find it hard to avoid offering GM a similar loan package to the one it offered Magna.

Reporter: Brett Neely
Editor: Sam Edmonds