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GM Board Will Weigh Opel's Future At Nov. 3 Meeting

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By Sharon Terlep


DETROIT -(Dow Jones)- The board of General Motors Co. will review the planned sale of a majority stake in its Opel/Vauxhall unit on Nov. 3 in what a person familiar with the situation described as an effort largely aimed at reassuring European regulators it wasn't forced into the proposed deal.

The auto maker has said it's still working toward a pact with parts maker Magna International Inc. (MGA) and Russia's OAO Sberbank (SBER.RS) but any deal faces scrutiny from European Commission officials concerned that this was the only option backed by crucial German government support.

Moreover, there's still some chance GM could revisit the idea of keeping Opel, two people familiar with the board's thinking said, though that remains a less likely scenario.

The new board review follows a request from the Commission for GM to confirm that the promised EUR4.5 billion in aid from--which pushed hard for a deal with Magna--did not effectively rule out other bidders. The person familiar with the situation said it would be "impossible" to provide such a guarantee given that Germany had made its preference for Magna so clear during the sale process and held so much leverage in bankrolling Opel with emergency loans.

The board will use its regularly scheduled meeting in November to revisit the options and discuss unresolved elements of the Magna deal, the person said.

The German government has written to both the trust currently overseeing Opel and GM to clarify that the financial aid would be available to other possible buyers. It's not clear whether Germany would provide aid to GM should it decide to keep Opel.

Jonn Smith, GM's chief negotiator in the Opel sales talks, confirmed that a final decision on Opel wouldn't come before the board meeting.

"Work will continue to resolve remaining open points ... and complete all preparations for the signing of binding agreements," Smith wrote in a company blog on Friday.

The German government has been under pressure from the Commission and other European states with Opel/Vauxhall plants to provide assurances that its aid wasn't aimed at preserving domestic jobs at the expense of those elsewhere.

German Economy Minister Karl-Theodor zu Guttenberg wrote to GM Chief Executive Fritz Henderson seeking an expedited decision on Opel.

The Oct. 17 letter seen by Dow Jones Newswires seeks to quash the notion that German aid was tied exclusively to a deal with Magna and Russian Partner OAO Sberbank. While the board backed the sale of a 55% stake to Magna/Opel following a meeting last month, the fresh discussion would allow GM to tell European competition officials that a final decision was made free of German political pressure, according to the person familiar with the situation.

The new review still raises a possibility that GM could reconsider Opel's fate, although alternative bidders aren't seen as likely. Before going with Magna, GM mulled selling Opel to Belgian investment fund RHJ International. The auto maker also weighed keeping Opel and managing a Detroit-led restructuring.

A contingent of the GM board remains opposed to selling Opel, worried that losing the European arm could hurt the auto maker's ability to compete globally, the two people familiar with the board's thinking said.

However, keeping the unit would be rife with complications, including whether GM would be able to secure government funding needed to restructure.

GM hoped to finalize the much-delayed deal by early October, with the closing planned for the end of November, but suffered several delays as talks over labor issues and terms and conditions of the state aid backing the deal dragged on longer than anticipated.

Smith confirmed that talks over these issues are still ongoing.

Magna has reached provisional agreements with labor unions in Germany, the U.K., Poland, Austria and Belgium on its restructuring plans for Opel and Vauxhall. On Thursday, a Spanish Industry Ministry official said labor representatives there have also reached a preliminary agreement. Union members are expected to vote on the agreement Monday.

-By Sharon Terlep, Dow Jones Newswires; 248-204-5532; sharon.terlep@ dowjones.com.

(Christoph Rauwald in Frankfurt and Andrea Thomas in Berlin contributed to this article.)

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