General Motors decides to retain Vauxhall/Opel

General Motors is to retain ownership of Vauxhall/Opel with the giant manufacturer’s directors promising to ‘initiate a restructuring of its European operations in earnest’.

The U-turn was announced early today (Wednesday, November 4) following a board meeting in Detroit.

In a statement the board said that it had decided to walk away from a deal with Canadian parts manufacturer Magna International, which had resulted in significant political wrangling across Europe, due to an ‘improving business environment for GM over the past few months’ and the ‘importance of Opel//Vauxhall to GM’s global strategy’.

GM president and CEO Fritz Henderson said: “GM will soon present its restructuring plan to Germany and other governments and hopes for its favourable consideration.

“We understand the complexity and length of this issue has been draining for all involved. However, from the outset, our goal has been to secure the best long term solution for our customers, employees, suppliers and dealers, which is reflected in the decision reached. This was deemed to be the most stable and least costly approach for securing Opel/Vauxhall’s long-term future.”

On a preliminary basis, the GM plan entails total restructuring expenses of about €3 billion, significantly lower than all bids submitted as part of the investor solicitation.

GM says it will work with all European unions to develop a plan for meaningful contributions to the restructuring. While Vauxhall/Opel continues to outperform against its viability plan assumptions and immediate liquidity is stable, time is of the essence, said the GM statement.

Mr Henderson added: “While strained, the business environment in Europe has improved. At the same time, GM’s overall financial health and stability have improved significantly over the past few months, giving us confidence that the European business can be successfully restructured.”

A GM Europe statement added that the directors’ decision underlined that Vauxhall/Opel had a key role to play in the parent company’s global strategy. The statement added: “In the interest of Vauxhall/Opel, all parties will work to safeguard a successful future for the two brands.”

Business Secretary Lord Mandelson, who has been closely involved in the political talks to safeguard the future of Vauxhall, which employs more than 5,000 workers in the UK at plants in Luton and Ellesmere Port, said: “I am keen for very early discussions with GM over their plans for the business and how they will affect British plants and workers.

“I have always said that if the right long term sustainable solution is identified, then the Government would be willing to support this.”

GM’s decision was immediately welcomed by Tony Woodley, a former Vauxhall worker and joint general secretary of the Unite union. He said: “This is an incredible turnaround from General Motors. I am absolutely delighted with this news. It is fantastic news for the UK and right that General Motors does not break up its family and instead retains ownership of Vauxhall.

“The problems for General Motors were rooted in the US, not in the UK where our plants restructured themselves years ago, becoming the best and most efficient in Europe.

“In terms of securing the best future for Britain’s plants, we want Vauxhall to be part of a giant global company, one which is now successfully restructuring thanks to [President] Obama’s intervention. Far better to remain within the experienced General Motors group than be spun off to Magna which simply does not have the expertise to run a global car company.

“This is a massively significant development and a far better deal for Britain. We expect our government to do all it can to support it.”

But unions in Germany said workers would begin walk-outs from tomorrow (Thursday, November 5) to protest about the reversal.

The German government, which had backed the sale of Vauxhall/Opel also criticised the change of mind and demanded that GM repaid a €1.5 billion loan. German Economy Minister Rainer Bruederle said: “We will get back taxpayers’ money.”

* Meanwhile, it has also been revealed that Vauxhall chairman and managing director Bill Parfitt will retire at the end of the year. However, he will continue to support the Vauxhall/Opel organisation as non-executive chairman from January 1, 2010, focusing on non-operational activities in the business.

Duncan Aldred (38)will return to the UK to take up the roles of managing director GMUK Ltd and executive director sales, service and marketing UK and Ireland. He is currently director, European sales operations in GM Europe. (General Motors/ Department for Business/BBC.co.uk/Fleetnews.co.uk: November 4).

Challenging year results in 9% drop in fleet size of major leasing firms

The recession has resulted in fleet sizes falling for the majority of contract hire and leasing companies listed in this year’s ‘FN50’ compiled by industry publication Fleet News.

The size of the UK fleet on which the top 50 leasing companies take residual value risk has dropped 9% in the last 12 months from 1,494,460 to 1,359,519.

It means the number of vehicle’s operated by the 50 largest leasing companies is close to 2002/3 levels as 35 of the UK’s 50 largest leasing companies reported a drop in fleet size in the past 12 months.

The merger of Lloyds and HBOS has created a dominant player in the UK contract hire market with Lex Autolease – which embraces the former Lloyds TSB Autolease and Lex fleets – accounting for some 338,000 vehicles – a 25% share of the annual ‘FN50’.

The second largest fleet is run by LeasePlan (121,960) followed by Lombard Vehicle Management (90,468), Arval (73,497) and Daimler Fleet Management (53,664).

While the market share of the top five players has increased 3.7%, all have reported a shrink in their fleet size in the past 12 months.

However, the contract hire and leasing companies in positions 21 to 50 have fared the worst this year, with their fleet sizes reducing by 20% on average, resulting in a loss in market share of 1.7%.

The publication says that the smaller leasing companies – number 50 in the listing is Hilton Vehicle Leasing with 1,145 vehicles – have been worst hit by the recession and the squeeze on liquidity and credit risk.

Other headlines from the 2009 ‘FN50’ include:

• An expectation among more than 50% of the leasing companies that the 2009 rise in residual values will continue in the coming months

• Audi dealers being viewed as the best by leasing companies, narrowly ahead of the BMW network

• The average replacement cycle for company cars is now 37.4 months, up from 36.9 months a year ago

• BMW offering the most reliable company cars closely followed by Honda with Audi in third spot

• The most reliable car is considered to be the Honda Civic followed by the BMW 3 Series. (Fleet News: November 3).

Improving Chrysler could take a decade

Chrysler and Fiat will have along and tough time harmonising products, parts and production, analysts have warned.

Analysis released by Deutsche Bank warns that most automotive mergers take ‘easily a decade to fully bear fruits’.

Deutsche Bank said the cost benefits of combined purchasing for the two automakers would not be easy to realise given how little geographic overlap there is.

Nevertheless, it said the geographic differences offer market potential. Chrysler historically has sold 90% of its vehicles in North America, whereas Fiat is strong in Europe and Brazil, where it could push Chrysler products forward.

The analysts see savings for Fiat in stopping some of its own development efforts and replacing them with Chrysler technology, such as large saloons and SUVs.

Deutsche Bank puts at zero the value of Chrysler to Fiat initially (noting Fiat paid no cash for its initial 20% stake), which Deutsche Bank said has no real downside other than the investment in time and energy if the joint venture fails.

There is one area where adding Chrysler could prove to be of value to shareholders, the Deutsche Bank report said. (AM-Online: November 3).