As mentioned on Sept 24th GM was close to selling its European subsidiary Opel, which also includes the UK brand name Vauxhall, to the Canadian car parts manufacturer Magna. Today GM announced that it had reversed the decision to sell Opel to Magna, and would instead be pressing ahead with 10,000 redundancies in Europe, from a workforce of 55,000. This decision was motivated by a wish to remain within the European market, which GM says is starting to improve. GM are also thought not to want to miss out on expansion in the growing Russian market, a motive perhaps driven by the US Government's wish to float GM on the stock exchange as soon as possible. It will be easier to do this if GM has strong growth prospects. Meanwhile the German government and car unions are unhappy with GM's decision as they had negotiated a guarantee from Magna not to close any German factories. The German government is now also demanding the return of a €1.5bn bridging loan made to Opel to keep it going while the sale was negotiating, while the IG Metall union has announced a series of walk-outs in protest. Meanwhile in the UK the government and trade unions welcomed the news as it meant that factory closures in the UK now seem less likely. Even the Russians are in the mix - their state owned Sberbank had provided capital for the Magna takeover, and Russian Prime Minister Vladimir Putin announced that the Sberbank-Magna consortium would 'carry out a deep legal analysis of the situation' with GM.
Why then are all these governments fighting for their share of influence over GM? The US, Canada, Germany, and the UK can all be considered to have mature economies, while Russia's economy perhaps presents the main growth opportunity for the car manufacturing industry. It appears that the western governments were again acting to try to halt the long term decline of car manufacturing in their particular jurisdictions. Yet it surely seems likely that while government intervention may prolong the decline of the industry, as previously argued emerging economies like Russia are likely to be in a position to maintain production most economically in future. To complicate matters we now have an SOE in the unusual position of operating across borders, although as with other SOEs that operate across borders such as Électricité de France or Deutsche Bahn, it is unclear why the firm should be an SOE if it is operated like a private firm. Once again, it is clear that governments should accept that if an industry is declining, the government should concentrate on encouraging replacement industries to develop, rather than trying to keep dead ducks alive.