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General Motors Co.'s last-minute decision to hang on to its European Opel marque left Russian Premier Vladimir Putin and German Chancellor Angel Merkel spluttering with anger and induced German unions to take to the streets chanting abuse, but despite all this negativity, retaining control of its European operation makes lots of sense.

It's not often that a decision has angered such a wide range of powerful opinion but GM managed it. A Wall Street Journal editorial put it this way: "Auto executives are almost as bad at politics as politicians are at making cars -- at least if the international flap over General Motors' decision to keep Opel is any indication."

There were four main reasons why GM felt able to face down the inevitable firestorm of rage from such important quarters. Firstly, Opel and its sister company Vauxhall of Britain benefitted hugely from Germany's 5 billion euro ($7.5 billion) and to a lesser extent the U.K., France, Italy and Spain's "cash for clunkers" schemes. This meant that as the protracted talks with the Magna of Canada/Sberbank of Russia consortium dragged on through the German election on September 27 and beyond, Opel Vauxhall's financial situation was being dragged back from the abyss.

Secondly, the decision by the European Union to investigate Germany's 4.5 billion euro ($6.7 billion) offer of aid to Magna made GM sit up and think -- "Hey, if we hang on to Opel, why can't we have that money?"

Thirdly, GM's turnaround in the U.S. meant that the financial pressure was off for the time being and it could look again at retaining Opel-Vauxhall. Lastly, as GM's gaze shifted from the U.S. back to its global possibilities, it became obvious that Opel's role, through its Ruesselsheim design and research center, was central to a huge part of GM's still profitable small car empire from Russia to China and Latin America. Many money-making products in these far flung outposts were really Opels under the skin, even though they were badged as Chevrolets, Daewoos and Buicks.

"The most important thing about Opel is Ruesselsheim," said Peter Schmidt, editor of pan-European fortnightly newsletter Automotive Industry Data.
GM needs Opel more than Opel needs GM

"GM needs Opel desperately, but Opel doesn't need GM. The Ruesselsheim R&D center is behind all those small cars GM sold in Korea, South America, China which are essentially all vehicles conceived and designed by Opel. These are all areas where GM has been making money in these worst of times and all this would have been cut off at a stroke if Magna had taken over," said Schmidt.

"GM would have had to buy all future products from Magna. Without Opel, GM would have shot itself in both feet," he said.

The Financial Times Lex column agrees.

"Retaining Opel is the best solution, even if it angers Berlin and Moscow. It will be cheaper, too. GM is seeking less aid than Magna. But it must now grab the opportunity provided by the financial crisis to restructure its European operations in a sweeping and nonpoliticized way. That means sticking to earlier plans to cut up to 10,000 jobs in the commercially most appropriate locations, and reduce overcapacity by closing two or three of its European assembly plants," Lex said.

There were some rumblings of unease this week when the debt rating agency Moody's said Opel-Vauxhall would need about $8.5 billion (not the mooted $6.6 billion on offer from Germany to Magna) to effectively restructure and operate Opel. But this was refuted by GM CEO Fritz Henderson.

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