WASHINGTON (Reuters) - The Obama administration’s autos task force was caught off guard when General Motors Co GM.UL decided to scrap a planned sale of its Opel unit that had the strong backing of Germany, a senior official said.
Ron Bloom, the U.S. official who heads the autos task force that steered GM and Chrysler through recent bankruptcies, said the surprise change of course by the automaker on Opel underscored the independence of a new board put in place to safeguard the U.S. government’s investment in GM.
GM angered its German unions and Berlin in early November by abandoning a carefully negotiated plan to sell a majority stake in its Opel unit to a Russian-backed group led by Canadian auto parts maker Magna International MGa.TO.
“We were completely surprised. Our anticipation was that it was going to be approved,” Bloom said in an interview with Reuters on Tuesday.
“But the board of directors is an independent board of men and women who take their own decision. They made their own decision and we’re not going to try to get them to change it. I guess we could have said something. We absolutely did not.”
In September, GM’s board had approved the sale of Opel to the Magna-led group.
German Chancellor Angela Merkel’s government had pledged to support the sale with 4.5 billion euros ($6.7 billion) in financing in a bid to protect jobs in Germany.
When the GM board met in early November to review that decision, that meeting in Detroit coincided with a visit to Washington by Merkel, where she addressed a joint session of Congress and met with U.S. President Barack Obama.
Bloom said the timing of the GM decision was politically “awkward” since U.S. officials had not been able to notify their German counterparts during Merkel’s visit.
But he also said the Obama administration remained committed to leave GM’s board and management alone to run the company in which it holds a 60.8 percent stake. GM has taken $50 billion in federal funding, including $30 billion in financing to restructure in bankruptcy.
“Our friends in Germany were upset and we were most assuredly not glad they were upset,” Bloom said. “We value this relationship hugely. We would not sneak up on you with this ever. But we got snuck up on with this. And that’s what happens when you have an independent board that makes up their own mind.”
He added: “In a perfect world, I would have known about it in advance. But you can’t know about it in advance because it’s a decision that happens in the board room. So by definition, I couldn’t know.”
“I think it’s important to have bright lines like that because the temptation to wander is overwhelming. I think the way to run these things is with quite bright lines.”
GM’s European operations, which include the Opel and Vauxhall brands, employ about 50,000, with about half of that total in Germany.
The head of GM’s European operations said on Tuesday that the automaker could cut between 9,000 and 10,000 jobs as it restructures Opel as part of a plan expected to cost 3.3 billion euros ($4.9 billion).
GM is seeking aid from other European governments to fund that Opel restructuring. Bloom said the U.S. government would not be actively involved in those discussions but could be consulted.
“Whether the foreign governments participate is something that GM will work out with the foreign governments,” he told Reuters. “I guess we’re hoping they do because it’s good for all but we’re not going to presume to tell Germany, Poland, England or Spain what’s in their interest. That’s something they will have to sort out.”
Bloom also said GM’s board had clearance to invest the company’s cash in overseas operations if it judged that those outlays would make the automaker a stronger global player.
In addition to its pending investment in restructuring Opel, GM has also had to put more money into its Korean GM Daewoo unit. In October, GM took its stake in that subsidiary to 70.1 percent with a $413 million investment.
Bloom said the board had concluded that investment, like Opel, would strengthen GM’s operations and engineering reach.
GM ended the third quarter with $43 billion in cash. The U.S. government has provided over $50 billion in funding to the automaker, including $30 billion to finance a fast-track bankruptcy this summer.
“Once you own shares in a global company, you have to say, you guys run this to maximize shareholder value and that’s what we’re trying to do,” Bloom said.
Bloom, a veteran investment banker who had also been an assistant to the president of the United Steelworkers union, joined the Presidential Task Force on the Auto Industry in February.
He took responsibility for overseeing remaining work with the U.S. auto industry in July when former task force chief Steve Rattner stepped down.
Additional reporting by John Crawley; Editing by Andrea Ricci