General Motors Board of Directors to decide at last on sale of GM Europe

For those of us who thought this was all sorted out months ago, GM has yet to confirm the sale to Magna in part because the European Commission raised concerns over the terms of the German government's 4.5 billion support package for Opel, in particular whether it undermined the Single Market.

The German government was said to favour strongly a sale to Magna as the latter had promised the fewest number of job cuts in Germany. The key issue for the European Commission is whether Germany only made the support package available to a Magna deal, effectively denying RHJ - a Belgian based firm - the chance of a takeover. If so, that could contravene the rules of the Single Market.

Under some intense European Commission scrutiny, the German government has reacted by stating in a letter to GM that there were no conditions attached to the loans, and that funding would be available to another firm acquiring Opel.

That's all very well, but meanwhile RHJ - which was thought by many to be GM's preferred bidder - has driven off into the sunset looking for other deals and has said that it isn't resurrecting a GM deal.

The long delays have, however, given GM plenty of time to consider other options.

Meanwhile, Magna has been under pressure from governments around Europe - including in the UK - to reduce job losses in return for financial support. A key deal between Unite the union and Magna in the UK would see only 600 job cuts in return for a pay freeze by the workers and a financial support package from the UK government.

In addition, two large customers of Magna (which is currently both an auto parts supplier and a contract manufacturer) - namely BMW and VW - have stated that they will look again at their relationship with the firm if it goes ahead with the Opel purchase (Opel after all competes with VW in some key markets).

And the Russian bank Sberbank (which is channeling Russian state money into the deal) has been looking at how Opel might support Russian auto giants VAZ and GAZ. One is near bankrupt and the other has been bailed out.

That Russian angle has worried some on the GM board who fear that Opel might compete with the GM brand Chevrolet which is doing well in Russia, and that it could lose control of key technology that Opel is developing. The latter is critical to GM's need to develop smaller, energy efficient cars.

Magna wouldn't be GM's first choice of partner but with it's probably too late, politically too difficult and too expensive for GM to find another partner now. At the end of this month a €1.5 billion bridge loan expires, for example. Delays will mean that all parties involved further costs - something GM can't afford.

So, we're likely to see the deal finally agreed by the GM board today, although whether it is really the right move for GM long-term is another issue.

In terms of Vauxhall workers in the UK, the union Unite has moved quickly to offer a deal to save jobs and the government has indicated its willingness to act in terms of a financial support package for Vauxhall. It will need to.

Footnote: An interesting report by the US Government Accounting Office (GAO) suggests that under the deal with the government to get aid, GM agreed to "use its commercially reasonable best efforts" to keep its US manufacturing within 90% of the level in its business plans. The report also questions the ability of the US Treasury to effectively monitor GM.

Professor David Bailey works at Coventry University Business School.