GM General Motors Company

By William Boston 

BERLIN -- General Motors Co.'s talks with Peugeot over Opel aren't GM's first flirtation with unloading its German subsidiary.

As far back as 1936, just seven years after GM rescued Germany's top auto maker from the Great Depression and five years after it took full control, some GM executives proposed selling a stake to German investors to pre-empt Hitler from taking full control.

Alfred P. Sloan, who created GM from a collection of smaller U.S. car makers, nixed the idea because he had bigger plans for Opel.

"When Germany does overcome her difficulties, as she eventually will, then General Motors will be in a position to take advantage of the hard work and progress which has been made during the past seven or eight years in the form of profits which are transferrable to America," he told fellow executives.

Since then GM has walked a tightrope with Opel, balancing the hope of churning out big profits in Europe and the headaches of owning a frequently unprofitable German company that many Germans consider to be American.

GM came close to selling Opel in 2009, but decided to take one more shot at success in Europe. Now, it seems GM has run out of reasons to stay and said Tuesday it was discussing the sale of Opel to French rival Peugeot in a move to pull back from Europe and focus on its home U.S. market.

GM Opel, which includes the British auto maker Vauxhall, is Europe's sixth-largest car maker by sales, with a market share of nearly 7%. Volkswagen AG, the world's leading car maker by sales, is the biggest-selling manufacturer in Europe, claiming 24% market share last year.

Before the rise of Volkswagen's storied Beetle in postwar Germany, Opel was the closest thing to a "people's car" that German industry had developed. Opel earned its reputation as the family ride with its now legendary Kadett, developed by Heinrich Nordhoff, who after the war would lead Volkswagen and transform the Beetle into a global icon.

Opel's Kadett continued to roll off the assembly line in Rüsselsheim, near Frankfurt, until the 1990s, when it was replaced by Opel's best-selling model, the Astra.

In the wake of the global financial crisis and GM's bankruptcy in the U.S., Opel again descended into crisis. GM put Opel on the block. An offer by Italian auto maker Fiat SpA was rejected by the German government. Then, after months of negotiations and lobbying to win over Chancellor Angela Merkel's government, GM announced in September 2009 that it would sell Opel to Magna International Inc., an auto assembler owned by Austria's Frank Stronach.

But GM had a change of heart. Two months after announcing the Magna deal, GM pulled out. The new GM management decided that it also had long-term strategic ambitions for its German subsidiary.

GM embarked on a massive restructuring of its European business, even winning German support to close one of its major factories in Bochum. New GM Europe CEO Karl-Thomas Neumann, a former CEO of supplier Continental AG, set out to reach profitability by 2016.

"The turnaround is hard," Mr. Neumann said at the beginning of last year. "But we still want to reach break-even in 2016."

He almost made it, but then the British voted in a national referendum to leave the European Union last June, sending the British currency plummeting and creating losses on foreign exchange at GM's European business. After struggling for years, GM Europe again missed its target, reporting a $257 million loss on revenue of $18.7 billion last year.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

February 14, 2017 13:57 ET (18:57 GMT)

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