Tags: EU | Germany | GM | Opel

GM's Opel Withdraws European Aid Applications

Wednesday, 16 June 2010 11:03 AM

General Motors Co. said Wednesday that it is withdrawing applications for some 1.8 billion euros ($2.2 billion) in European government aid to its Opel and Vauxhall units and will fund their restructuring itself.

The announcement came a week after Germany's government rejected GM's request for loan guarantees for Opel. The automaker said it needed to move ahead with its plans after months of wrangling over aid, and said its own improved finances were a factor in the decision.

GM said that its funding requirements haven't changed, and neither had the reasons for requesting government loan guarantees. But it said that the process was "much more complex and longer than anticipated and the results are still not finalized or certain."

Britain's government committed loan guarantees to the tune of 330 million euros and Spain had indicated that it would commit a similar amount, GM said in a statement. The four German states where Opel has plants also had voiced willingness to negotiate contributions.

However, Opel and Vauxhall CEO Nick Reilly, who has put the total funding needs at 3.3 billion euros, said that "we need to move on."

"The decision of the German government last week was disappointing and means that the conclusion of these guarantees is again likely to be months away," he said.

GM's move ends lengthy maneuvering over European aid for Opel and Vauxhall.

Last November, GM abruptly canceled the planned sale of a majority in the units to a consortium led by Canadian auto parts maker Magna International Inc., instead deciding to restructure the brands itself.

That decision irked Germany, which had pushed hard for the sale and had been prepared to offer financial support for it.

GM sought aid from European governments this year as it presented a restructuring plan that foresees some 8,300 job cuts across the continent. It also committed 1.9 billion euros of its own to the effort.

The two brands employ around 48,000 people in Europe, roughly half of them in Germany.

In May, GM reported an $865 million first-quarter profit, its first positive quarter in three years. The profit came as global auto sales started to recover and despite a $506 million loss in Europe, the only place GM lost money.

German Economy Minister Rainer Bruederle, who had cited GM's own improved finances in rejecting its aid application, welcomed its decision to give up seeking assistance.

"I feel vindicated in my assessment that General Motors has the funds for an Opel restructuring," Bruederle told reporters in Berlin. He welcomed the fact that GM "seems ready to take its full responsibility as an owner toward its 100 percent subsidiary Opel."

In Detroit, GM spokesman Tom Wilkinson said the decision not to seek European aid means U.S. and Canadian government dollars will be used to help restructure Opel.

But he said the governments have known that GM could spend the money elsewhere ever since the new General Motors Co. was formed after GM emerged from U.S. bankruptcy protection last July.

"Treasury understands that's how you have to operate the business," Wilkinson said. "We have to run the business prudently and we have to make sure we're maximizing the return for our investors. That requires running the company globally."

GM has received about $50 billion in aid from the U.S. Treasury and $9.5 billion from the Canadian and Ontario governments. It has repaid $6.7 billion to the U.S. and $1.4 billion to the Canadian governments, with the rest converted to equity in the automaker.

The U.S. government owns about 61 percent of GM, while the Canadian federal and state governments own roughly 12 percent. GM hopes to repay all government aid with a public stock offering, perhaps later this year.

Opel's Reilly said GM's decision "will allow us to move forward with confidence in this very competitive industry."

"We cannot afford to have uncertain funding plans and new time-consuming complex negotiations at this time when we need to keep investing in new products and technologies," he added.

"With these new products and the impact of restructuring, we expect to return to profitability shortly."

Opel and Vauxhall will now be able to concentrate fully on implementing its plans, in particular an 11 billion euro project to invest in future projects that was announced in February, GM said.

Last month, GM and Opel worker representatives reached a deal under which employees would contribute savings of more than 1 billion euros through 2014 to help the restructuring drives. GM noted that the agreement was not tied to government guarantees.

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General Motors Co. said Wednesday that it is withdrawing applications for some 1.8 billion euros ($2.2 billion) in European government aid to its Opel and Vauxhall units and will fund their restructuring itself.The announcement came a week after Germany's government...
Wednesday, 16 June 2010 11:03 AM
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