GM Close to Closing Opel Deal

Canadian-Russian Consortium Would Buy European Holdings

General Motors is finalizing a deal to sell a majority stake in its European Opel and Vauxhall operations, the company announced on Thursday, another step in the automaker's efforts to sharply pare back its operations.

The 55 percent share in Opel will be acquired by a consortium led by Canadian auto parts supplier Magna International, which is joined in the bid by Sberbank, one of Russia's biggest banks.

The dismantling of the old General Motors, while largely complete in the United States, had provoked political tensions in Europe, particularly in Germany, where Opel has four major plants and employs 25,000.

After Magna pledged to keep open the company's German plants, German Chancellor Angela Merkel's government openly supported its bid for Opel. The German government in May issued $2.2 billion in financing to keep the business alive.

In recent weeks, however, GM had entertained other ideas for Opel, including liquidation or simply holding on to it.

The U.S. government, which owns a majority stake in GM, was soon drawn into Opel's fate, as German politicians and labor leaders opposed those alternatives. Late last month, German Foreign Minister Frank-Walter Steinmeier called U.S. Secretary of State Hillary Rodham Clinton, and they discussed the proposed sale.

Ultimately, analysts said, GM probably realized that it would be difficult to revive Opel without German financial support.

The bid from Magna and Russian partner Sberbank is supported by German loan guarantees of $6.6 billion.

"In the final analysis Magna became the only feasible option left open to GM," said IHS Global Insight auto analyst Tim Urquhart.

In addition to the Magna's consortium's 55 percent stake in the company, GM will hold onto 35 percent, and employees will have a 10 percent stake.

This week, GM President and chief executive Fritz Henderson presented the board with four options: keeping Opel, liquidating it, selling it to Magna or selling it to investment firm RHJ International.

"The hard work over the past two weeks to clarify open issues and resolve details in the German financial package brought GM and its Board of Directors to recommend Magna/Sberbank," Henderson said in a statement. "We thank all parties involved in the intensive process of the last few months -- especially the German government -- for their continued support that enables this new venture."

If completed as envisioned, the agreement would transform Magna into an automaker with a significant international portfolio.

Frank Stronach, an Austrian-born tool-and-die maker who emigrated to Canada and built one of the world's largest auto-parts makers, is Magna's dominant shareholder.

Sberbank chief German Gref said in a statement: "This decision didn't come easily for GM or for us. The talks weren't easy at all and the structure of the deal is unprecedented in its complexity: just the Agreement on Intent runs to more than 1,000 pages. It's early to declare that a final decision has been made, this is for the moment a very important intermediate stage of the deal."

The parties are aiming to consummate the agreement in late November.