GM advances $938 million payment to help troubled Opel unit in Europe

 

GM advances $938 million payment to help troubled Opel unit in Europe


Automotive News | January 16, 2010 – 12:01 am EST

 

FRANKFURT (Reuters) — General Motors Co. gave 650 million euros ($938 million) to its troubled European unit earlier this month, underlining the problems Opel boss Nick Reilly’s new management team faces.

GM said it advanced cash for engineering work it otherwise would have paid Opel in April and July.

"The payment accelerations serve as a temporary funding source for the (Opel) group’s operations until more permanent financing can be arranged," GM said in a regulatory filing on Friday.

GM said it needs 3.3 billion euros to finance a restructuring for Opel and its UK sister brand Vauxhall.

European governments whose countries have Opel factories will pay close attention to the payment and Reilly’s new management team, since they have to sign off on 2.7 billion euros in taxpayer aid for a restructuring that includes cutting over 8,000 European jobs and possibly closing a plant in Antwerp.

On Friday, Reilly, a GM veteran credited with rescuing GM’s South Korean unit Daewoo, picked an old ally to join his new team along with a production boss and sales and marketing head who are both popular in their spheres.

Reilly picked Mark James as his finance director. The Briton joined GM in 1991 and, like Reilly, spent several years at its Vauxhall operations in Britain. He is currently CFO at Daewoo where Reilly was chairman until moving to Opel in November.

James will be responsible for creating a paper trail for European officials to track the use of taxpayer funds and ensuring Opel is meeting targets in its turnaround plan.

The group taking the helm at Opel also includes managers such as Reinald Hoben, a German who enjoys union support, as production boss and dealer favorite Alain Visser, a Belgian, to run marketing and sales.

Chevrolet rivalry fears

Reilly’s strong connections to GM Daewoo encumbered his start at Opel when he was initially appointed interim chief executive in November.

The Korean carmaker he rescued from near collapse nearly a decade ago is viewed by some in Germany as growing in Europe at the expense of Opel.

Armed with an artificially weak won, Daewoo was able to earn higher margins in Opel’s home markets by exporting cheap Chevrolets such as the Matiz. It also manufactures the Opel Antara SUV that has flopped, despite strong sales of the Chevrolet Captiva built on the same assembly line.

Troubled by veiled resentment towards him, Reilly addressed the issue head-on in his first conference call with the media as Opel CEO in early December, saying only about 1 percent of Opel sales were cannibalized by GM Daewoo’s Chevrolet brand.

Hans Demant, criticized for doing too little to save Opel last year, will trade in his role as GM’s top European engineer and German figurehead to oversee protection of the group’s global intellectual property rights, a new position at Opel.

Rita Forst, a powertrain specialist who has been with Opel since 1977, was promoted to chief engineer in Demant’s place where she will work with product planner Frank Weber to develop future Opel and Vauxhall models.

ENLARGE

Reilly will drive forward Opel’s reorganization with a new team.

 

 

Reilly will also step down from Opel’s supervisory board.

He will be replaced by Stephen Girsky, a member of GM’s board of directors and senior advisor to chairman Ed Whitacre — a sign of how important Opel has become to GM.

 

ENLARGE

GM’s payment acceleration will be a temporary funding source for Opel.

 

 

 
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