GM to ask Europe for help with Opel

November 6, 2009

GM to ask Europe for help with Opel

But automaker might use U.S. aid after halting sale

BY TIM HIGGINS
FREE PRESS BUSINESS WRITER

General Motors hopes to get European government help to restructure its German-based Opel division but could turn to some of the near-$50 billion in U.S. government money received earlier this year if need be, CEO Fritz Henderson said Thursday.

The Detroit automaker surprised German officials and labor unions this week by backing out of plans to sell Opel to Canadian auto parts supplier Magna International and Russian bank Sberbank. The German government had committed 4.5 billion euros ($6.68 billion) to help finance the deal, which would have left GM with a minority stake in the struggling company.

GM instead, buoyed by better-than-expected progress in its turnaround, wants to keep Opel and restructure the company itself, which will probably include cutting around 10,000 jobs.

On Thursday, Henderson said GM will seek financial assistance from European governments, such as Germany, to pay for the estimated $4.5-billion restructuring effort.

In addition, he said Opel will be able to pay for part of its restructuring.

"Part of it is from … GM," Henderson said. "Things have improved there, as far as liquidity position. … That would be our principal source of doing it," he added.

Furthermore, if needed, GM could lower the amount of money it charges Opel to use GM technologies to free up cash. GM could also allocate money acquired from the U.S. government through GM’s bankruptcy restructuring, he indicated.

This would be a departure from the earlier U.S. government loans that kept GM afloat prior to bankruptcy in June. Those loans stipulated that money from the U.S. Treasury could not be used to pay for operations outside the United States.

Henderson said the terms of the prebankruptcy loans and the new government financing are different.

"We are able to run a global business," Henderson said.

Henderson stressed: "We do have the ability, if it’s necessary, to provide support directly, but again that’s only if necessary."

GM’s 1.5-billion-euro German bridge loan — given last spring to keep Opel afloat as GM negotiated with investors — is due at the end of November, Henderson said.

"We will pay back the bridge loan. … Our liquidity is sufficient to allow us to do that," he said.

The idea of using money from the U.S. Treasury to restructure GM’s European division could cause heartburn in some quarters. Some House Republicans have been critical of the Obama administration’s rescue of GM, calling it the "bridge loan to nowhere."

24/7 Wall St. blogger Douglas McIntyre on Thursday called the potential use of U.S. taxpayer money to fix Opel while GM sheds U.S. jobs "another clever part of the American government’s job creation package."

In Germany, tensions are running high over GM’s decision not to go through with the Magna-Sberbank deal, which was favored by European labor unions and German politicians.

Thousands of Opel employees walked off the job on Thursday in protest.

Contact TIM HIGGINS: 313-222-8784 or thiggins@freepress.com

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