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GM to present plan to restructure Opel this week

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GM to present plan to restructure Opel this week

NOVEMBER 23, 2009 - 11:00 AM ET

UPDATED: 11/23/09 1:15 P.M. ET

BRUSSELS (Reuters) -- General Motors will present a plan to European governments to save struggling carmaker Opel within days, a rescue set to cost 3.3 billion euros ($4.9 billion), those involved in talks said today.

GM this month backtracked on plans to sell Opel to a consortium led by carparts firm Magna International Inc. -- a deal that involved government aid -- but is now turning again to European states for help to keep Opel in business.

Opel interim CEO Nick Reilly traveled to Brussels today to meet officials including German Deputy Economy Minister Jochen Homann and Kris Peeters, the premier of Flanders, a Belgian region where Opel has a plant.

The meeting was also attended by European Union Competition Commissioner Neelie Kroes, whose blessing is needed before any state can give financial aid, as well as the bloc's industry commissioner, Guenter Verheugen.

Dec. 4 meeting

Coming out of talks, Peeters said General Motors would present a restructuring plan for Opel to European governments by the end of the week and that European officials would discuss possible aid on Dec. 4.

GM's Reilly earlier put a cost of 3.3 billion euros on the rescue, saying: "We have indicated that we will inject some GM funds into that requirement too.

"That is quite difficult because we are also going through a restructuring of our U.S. operations and other parts of the world," he said.

On Monday, the EU's industry commissioner said that without state aid, the plan could not work.

"General Motors made one point very clear, 100 percent clear, the restructuring plan could only be achieved when European member states with Opel plants give some financial help," said Verheugen.

"So the plan works only with state aid. The idea that General Motors can finance this on its own was not shared by General Motors, this possibility does unfortunately not exist."

Reilly said GM intended to disclose details of its plan to workers and has set up meetings with works councils later this week.

Opel has struggled with slumping global demand as competition in the overcrowded car market remains cut-throat, the same problems that pushed parent GM into bankruptcy.

GM's core businesses have been stripped out and moved into a holding company. It had nearly $43 billion in cash in September after emerging from bankruptcy in July thanks to a $50 billion package that made the United States a 61 percent owner.

Job cuts

GM plans to cut its European production by 20 percent to 25 percent, the equivalent of the output of three factories, and cut 10,000 of its 50,000 workforce in Europe.

Earlier today, union representatives said they hope the future of Opel's workers in Europe will become clearer when they meet on Wednesday with Reilly to discuss restructuring plans.

"It's of crucial importance to us that there is a complete financing until 2014. We do not want at all to find ourselves in the situation that they cancel once again (investments in) models and new development work," Lothar Sorger, Opel's deputy labor leader in Kaiserslautern, Germany, said.

Labor leaders at Opel had agreed with Magna to contribute 265 million euros in annual savings despite the supplier's plans to cut around 10,500 jobs.

So far they have not ruled out offering the same deal to GM.

But Opel's European works council boss, Klaus Franz, has linked any concessions to greater independence for management in Ruesselsheim, Germany, and investment plans that would preserve all the manufacturing plants and as many jobs as possible.

Any move by GM to concentrate job cuts in countries that refuse to offer significant state aid could drive a wedge between unions and governments and alarm EU regulators in Brussels.

Verheugen and the premier of the German state of Hesse state, Roland Koch, have warned governments against trying to outbid each other in an "auction" to secure their local Opel jobs.

Reilly said after Monday's meeting that GM's plan for Opel will be based on economic criteria and will "not be impacted by any government's decision to what extent they support the plan."

He added: "It goes without saying that everything we do is transparent and fully complies with EU rules."

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