By Tim Weber
Business editor, BBC News website
Opel's factory in Kaiserslautern was under threat of closure
So this is it, the end of General Motors as we know it.
Once the world's largest carmaker, the one auto company whose operations truly spanned the globe, it is now officially falling apart, with its pieces either being sold off or about to go into bankruptcy protection, which is expected to happen on Monday. Yes, GM will remain, a mere shadow of a former giant.
But the deal struck in Berlin will not be the end of the wrangling over Opel. Weeks of detailed negotiations are ahead, which means prolonged uncertainty for Opel's and Vauxhall's workers, customers, dealers and suppliers. And it still may fall apart. Some analysts believe the merger has at best a 30% chance of going through.
If it happens, Opel management will have its work cut out to balance the interests of its four main shareholder: GM, which could end up with a 35% minority stake, Russia's Sberbank with a similar share, Magna with a mere 20% holding, and 10% in the hand of Opel workers and pensioners. Looming in the background will be GM creditors in the United States, the US Treasury, and most importantly various European governments, not least that of Germany.
It is the perfect recipe for corporate dithering and avoiding tough choices.
Not that the alternative would have been any better. Fiat - the Lazarus of European car-making - will have its hands full with Chrysler. It may succeed where previous owners Daimler and Cerberus Capital Management failed. It is doubtful whether it would have been able to solve all of Opel's problems on top of that.
So is the threat of an Opel insolvency gone for good? The short answer is no. Even one of the politicians that hammered out the deal is not too sure. German Economics Minister Karl-Theodor zu Guttenberg argues that it might have been better to let Opel go into bankruptcy protection, restructure the company, and relaunch it in the market.
It certainly might have been cheaper for the German taxpayer. A study compiled by his ministry seems to suggest the 1.5bn euro bridging loan and other help might come more expensive than an Opel insolvency - even including the cost of job losses and all the still generous welfare payments.
Five big hurdles
Apart from finalising the merger deal, Magna and friends now have to tackle five big issues:
- Has the separation of GM and GM Europe worked, or will next week's bankruptcy proceedings at General Motors have a knock-on effect on its former European operations? After all, GM has said clearly that it wants to keep its Opel connection alive.
- Will buyers take fright? Until very recently, Opel and Vauxhall cars were buyers' favourites across Europe. Opel is no Rover. But if any confidence issues sneak in - about the validity of warranties, the supply of spare parts etc - there are plenty of rivals to supply competing products.
- Can suppliers still afford to trade with Opel? With credit insurance hard to come by, Opel might have trouble getting all the parts it needs (although German government backing should help).
- Magna knows a lot about the car industry, but as parts maker, not car manufacturer. Does it have the expertise to turn around an operation that reportedly made a loss in nine out of the past 10 years?
- And most importantly, how can it staunch these losses? Which costs can be cut, which factories need to be closed, how much political pain can Magna and its partners inflict on the governments that are bankrolling the merger?
Who is safe?
As Germany put the most money on the table, it managed to negotiate that all four Opel factories in the country will survive, (with just 2,600 jobs set to disappear).
This leaves Opel's other European operations badly exposed. In the UK, it could mean the closure of one plant, probably Luton. In Belgium, Poland and Spain workers will also be fearful for their jobs.
Safest are probably Opel's Russian operations. After all, the involvement of Sberbank hints at big plans for the Russian market.
Left behind are the workers of Saab, GM's Swedish subsidiary. They are not part of the deal, and General Motors still hopes to find a buyer. The problem: Much of what makes a Saab these days is actually based on Opel engineering. Any buyer would have to start from scratch to return Saab to its old engineering glory.
Opel has been given a breathing space, and a perspective. The corporate all-clear, though, is still years away, not least because Europe's car industry has far too much capacity.
Had Opel failed, supply and demand across Europe's car market might have been more in sync. Its survival may be good news for its workers. For the rest of the industry it will prove to be a millstone.