The board of General Motors voted yesterday to cancel the company's plan to sell a majority stake in its German unit Adam Opel GmbH to Canadian car-parts maker Magna International and its Russian partner, Sberbank.

The US automaker said in a statement that its board had made the decision because of "an improving business environment for GM over the past few months".

Earlier in the day yesterday, it said its US sales had risen in September for the first time in almost two years.

The announcement came on a day when GM posted a 4-per cent gain in US auto sales, its first year-over-year increase in 21 months.

It is in this context that it now wishes to hold onto Opel and Vauxhall.

"While strained, the business environment in Europe has improved," Henderson said in his statement. "At the same time, GM's overall financial health and stability have improved significantly over the past few months, giving us confidence that the European business can be successfully restructured."

After a prolonged battle, Magna and its Russian partner Sberbank won 55-per cent stake in Opel and its UK sister company Vauxhall in September (See: Magna, Sberbank win GM's Opel, Vauxhall units).

According to analysts, the decision is likely to cause much anger in Europe. The German government had pledged Magna 4.5 billion euros ($6.7 billion) of loans to the ailing auto unit.

However, European Union's competition commissioner Neelie Kroes had raised concerns about significant indications on Germany's favouritism towards Magna, based on the commission's enquiry.

BBC reported the German government spokesman Ulrich Wilhelm as saying that Berlin regretted the decision, adding that it wanted GM to repay 1.5 billion euros in bridge financing extended by German banks.

Opel employs a total of 54,000 workers across Europe, with 25,000 based in Germany, while in the UK, GM's Vauxhall employs 5,500 people across two plants in Luton and Ellesmere Port.

Unite, the main union at Vauxhall, last month reached a deal with Magna to limit job cuts at the two factories to just 600 people, and all through voluntary redundancy.

GM's decision to sell its main European business was made after it was forced to announce a group-wide loss of $30.9 billion for 2008, after its sales plummeted in the global recession.

The company said it would now "initiate a restructuring of its European operations in earnest".

GM will soon present a new $4.5 billion restructuring plan to Germany and other governments, GM chief executive Fritz Henderson said in a statement last night.

GM added that it had also come to its decision because of the importance of Opel and Vauxhall to its global strategy.

Magna said in a statement that it would continue to support Opel and GM in the future.