General Motors has cancelled plans to sell a majority stake in its European car business Opel, which includes its UK brand Vauxhall. GM had agreed to sell Opel and Vauxhall to Canadian car parts firm Magna.

The US giant said in a statement that its board had made the decision because of “an improving business environment for GM over the past few months”. It added that it would now be seeking aid for Opel from the German government and other European states and that it had come to its decision because of the importance of Opel and Vauxhall to its global strategy.

It said it would now “initiate a restructuring of its European operations in earnest”.

Magna co-chief executive officer Siegfried Wolf said: “We understand… it was in GM’s best interests to retain Opel. “We will continue to support Opel and GM in the challenges ahead,” he added.

However, its decision is likely to cause much anger in Europe, where the planned sale of Opel has been dragging on for months, and the German government had pledged Magna 4.5bn euros ($6.7bn; £4bn) of loans.
Government spokesman Ulrich Wilhelm said Berlin regretted the decision, adding that it wanted GM to repay 1.5bn euros in bridge financing extended by German banks.

GM first said in March that it wished to offload Opel and Vauxhall, before finally agreeing to sell to Magna in September.

The US giant’s decision to sell its main European business was made after it was forced to announce a group-wide loss of $30.9bn for 2008, after its sales plummeted in the global recession.
However, aided by financial support from the US government, and a brief period in US bankruptcy protection in June and July of this year, GM has since managed to turn around its fortunes.

On Tuesday, GM said its US sales had risen in September for the first time in almost two years and it is in this context that it now wishes to hold onto Opel and Vauxhall.

However, the German media is already questioning how easy it will be for GM to simply cancel the sale agreement.

This is because when GM went into administration, ownership of Opel and Vauxhall was transferred to a trust, headed by two representatives of GM, two from the German government and one independent panel member.
German newspapers have speculated whether it is this trust and not GM that will have to make the final decision.

The decision to sell Opel to Magna had been controversial because of the German government’s offer of the 4.5bn euro loans.

The European Commission warned last month that Berlin’s offer of this aid may breach European competition rules because there were “significant indications” the German government had only been offering the money if Magna’s bid was successful, and not that of rival suitor, Belgian investment fund RHJ.

The German government immediately denied any wrongdoing.