(RTTNews) - Automaker General Motors Co., which emerged from bankruptcy in July, on Tuesday said that its board has decided to retain its German unit Adam Opel GmbH and British sister brand Vauxhall, citing the improving business environment as well as the brands importance to GM's global strategy. The new GM would now initiate a restructuring of its European operations, which could see total restructuring expenses of about 3 billion euros.

In a statement, GM's President and Chief Executive Officer Fritz Henderson said, "GM will soon present its restructuring plan to Germany and other governments and hopes for its favorable 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, employee, suppliers, and dealers, which is reflected in the decision reached today. This was deemed to be the most stable and least costly approach for securing Opel/Vauxhall's long-term future."

In early September, GM agreed to sell its majority stake in Opel and Vauxhall to a consortium led by Canadian car-parts maker Magna International, Inc. (MGA, MG-A.TO). Magna teamed up with Russian auto maker OAO GAZ Group and state-controlled Russian financial group OAO Sberbank for the deal. The deal was originally expected to be signed in early October and close by the end of November. The German government has helped Magna to win the bid by offering 4.5 billion euros or US$6.4 billion in state aid.

Under the deal, Magna and Sberbank would acquire a 55% stake in new Opel, with GM retaining a 35% stake and Opel's employees holding a 10% stake. The new company would have taken charge of all of GM's European operations.

Talks with Aurora, Ontario-based Magna were earlier hindered by its demands to control the distribution of GM's Chevrolet brand in Russia and to use GM's intellectual property for purposes not included in the original agreement. GM was wary of Magna's Russian partner, who could use the Opel technology to compete against GM in Russia and other emerging markets.

Meanwhile, GM was favoring the bid from RHJ International as the automaker could have the option of re-integrating Opel into its fold once its financial problems were solved. The RHJ bid would also have enable GM to keep control over Opel's technology.

Germany pressed for Magna to win the bid in order to protect the future of thousands of local Opel workers. Further, German chancellor Angela Merkel, who was keen to rescue jobs at Opel ahead of a September 27 federal election, lobbied hard for Magna to win the bid.

The European Commission also raised some doubts about the fairness of the bidding battle for Opel, more specifically the terms of German government aid, which was offered for choosing a particular investor or plan. The German government had favored the joint bid made by Magna and its Russian partner Sberbank for the takeover of Opel, ahead of the offers made by Belgian private-equity firm RHJ International SA (RHJIF.PK), Italian car maker Fiat SpA (FIATY.PK), and China's Beijing Automotive Industry Holding Company.

 Continued...