General Motors will decide in early November whether to proceed with a deal to sell its European arm Opel to a group led by Canada's Magna or to seize a new opportunity to keep the unit after seven months of grinding negotiations.
GM's chief Opel negotiator, John Smith, said on Friday that the automaker's board of directors would reconsider the sale at its next regular meeting on November 3.
The announcement dashed expectations that the long-awaited sale of a 55 percent stake in Opel could be signed as soon as this week and opened the door for GM's board to set a new course for recapitalizing its loss-making European unit.
GM emerged from a U.S. government-sponsored bankruptcy in July with $50 billion in taxpayer funding and a new board vetted by the U.S. Treasury that has pushed management to reverse the long-running slide in sales in its home market.
In September, GM's 13-member board agreed to sell control of Opel after ruling out the option of raising the $6 billion in cash consultants said would be needed to keep the unit.
But European Union regulators have asked GM to confirm it would make the same decision knowing that 4.5 billion euros ($6.75 billion) in state aid promised by Germany would go to any buyer of Opel, not just Berlin's favored bidder, Magna.
German Economy Minister Karl-Theodor zu Guttenberg has asked GM to confirm that the automaker chose Magna for business and not political reasons.
GM's Smith said that request would now go the board, a sign of the increased scrutiny by GM's new slate of directors.
Given the significance of the Opel transaction, GM's board will soon meet in its regularly monthly meeting to consider Minister zu Guttenberg's letter and changes to the Magna/Sberbank proposal that have occurred since its last review on September 9, Smith said in a blog posted by GM.
Magna had no comment.
'NEVER SAY NEVER'
GM Chief Executive Fritz Henderson had expressed confidence on Wednesday that an Opel sale would move ahead and said the mainstream plan remained closing the deal with Magna.
Because of the advanced stage of negotiations and the pressure on Opel's cash position, GM's board is most likely to proceed with a sale to Canadian auto parts supplier Magna and its Russian partner Sberbank , a person with direct knowledge the GM negotiations said on Friday.
But the board could also re-examine the possibility of keeping Opel now that German officials have been forced to provide explicit assurances that their financial support for Opel was not limited to Magna, according to the source, who asked not to be named because the talks remain private.
I would never say never, the person said about the possibility that the GM board could opt out of the Magna deal.
GM's Smith said the company would work to resolve remaining open issues, including labor cost reductions in coming days.
Under the Magna deal, Opel's workers would receive a 10 percent stake in the new company in return for labor cost concessions, while GM would a 35 percent stake.
Opel's buyers originally intended to cut around 10,500 jobs in Europe, including around 4,000 in Germany, but talks with labor leaders have been whittling down the number of cuts.
Workers in Spain are due to vote on a preliminary deal that would keep a plant there open at the cost of 900 jobs.
UK-based union Unite has already reached an agreement with Magna that would preserve two Vauxhall production plants and rescue 600 of the jobs that were slated to go. Vauxhall employs around 5,500 people.
The U.K. Department for Business, Innovation and Skills said a number of key issues, including funding, remained under discussion. We are working hard toward an agreement. We, like everyone else, want a speedy resolution, but on the right terms, an official said in a statement.
Magna and the Russian bank have vowed to inject 500 million euros into Opel, aiming to use it to make an aggressive push into the Russian market.
The European Commission is keeping a close eye on the transaction to ensure state aid is not misused for political purposes. Magna had won Berlin's approval by proposing to keep all four Opel plants in Germany open.
(Reporting by Maria Sheahan and Michael Shields and Kevin Krolicki, additional reporting by John McCrank in Toronto and Adrian Croft in London, editing by Matthew Lewis)