Opel deal not dead despite GM reluctance
General Motor's board turned down a German-supported deal for Canadian company Magna to buy Opel. GM's management supported the transaction which makes the board's action unusual.
It is hard to say why the board made the decision. It said it needed to know more about Magna's financial support, but since a deal could not close without that, it would seem academic.. The board's action may simply be its way of saying it wants a better price.
According toThe Wall Street Journal, "The Opel/Vauxhall business lost $2 billion in the first quarter of 2009 and is being run by the trust with 1.5 billion euros in German government loans." That gives GM all the time in the world to pressure buyers on price.
GM was a desperate seller just a few months ago as its prospects for getting through Chapter 11 and securing US government financing were up in the air. That is not longer true and GM is posting strong sales in China and improving prospects in the US. The Opel transaction could drag on for the rest of the year as GM looks for better terms. The board does not have to say that. It can just keep saying "no"
Douglas A. McIntyre is an editor at 24/7 Wall St.