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NINETY EIGHT REGENCY

Opel aims to finalize restructuring plan in Feb.

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Opel aims to finalize restructuring plan in Feb.

January 26, 2010 12:01 CET

RUESSELSHEIM, Germany (Reuters) – General Motors Co. wants labor leaders to sign off on its restructuring plan for European unit Opel by mid-February, finally letting the company cut around 8,300 jobs amid chronically weak demand.

"I hope to get the plan finalized in two to three weeks," Opel CEO Nick Reilly told reporters on Tuesday at the company's headquarters outside Frankfurt.

Angered by Thursday's announcement that Opel's Antwerp plant in Belgium would close -- a step one union leader called a "declaration of war" -- labor has frozen negotiations over 265 million euros ($373 million) in annual wage savings over the next five years.

"There is a hiatus in the talks because of Antwerp, but next Monday we will have our first meeting," Reilly added.

In addition to the 600 million euros in fresh equity that GM has already contributed to Opel, Reilly has requested 2.7 billion euros in state aid either as loans or loan guarantees.

"Maybe we will not get the full 2.7 billion but I do expect we will receive a significant amount," he said.

All European countries that host major Opel manufacturing sites -- except Belgium -- remain open to extending state funding in principle, according to Reilly.

Germany is set to get a formal aid application from Opel by next Friday once an independent expert opinion required by the government evaluates the viability of Reilly's plan.

Until long-term financing is secure, Opel has enough liquidity to operate "well into the second quarter," Reilly said. GM's patent unit advanced Opel 650 million euros this month for engineering work first due to be billed later this year.

Opel faces another loss in 2010 as government incentives in its core western European market wind down, taking out some 1.5 million units in industry volume -- roughly 100,000 more than Opel's output when overall demand was strong a few years ago.

As a result, Reilly dismissed labor's accusation that he is cutting into muscle and bone rather than fat, leaving Opel too weak to react to a rebound in demand in the coming years.

Even in a best-case scenario of a bullish recovery, Opel market share gains and potential exports, the carmaker will have plenty of slack within its production footprint, he said.

"Even with the closure of Antwerp, our capacity is 1.5 million and that's before any overtime or any improvements that we can make," he said. Shutting operations down there was only the first restructuring step, albeit the most dramatic.

"There are going to be cost reductions across the whole of Europe to get our break-even point much lower, so we can be in a position to make money even in a weak market," Reilly said, adding that demand would remain tepid for two to three years.

He expressed hope that the Flemish regional government under Premier Kris Peeters would meet Opel to discuss a joint solution that could entail finding an investor for the Antwerp plant.

"We would be very flexible and work with them since the impact of closing the plant can be substantially reduced. Up until now the government has refused to talk about any of those things, which I find rather extraordinary," Reilly explained.

He added that no notable progress was made in talks with Renault over their joint light commercial vehicle production in Luton near London that is due to end in 2013.

Analysts believe French government pressure to relocate Renault Trafic production to France will be too great, and expect the van will be produced in an underutilized site such its upper-segment plant Sandouville that builds the Laguna.

Reilly reaffirmed his intention to find a successor model for Luton, which builds the Opel Vivaro alongside the Trafic, in case Renault pulls its production.

Read more: http://www.autonews.com/article/20100126/ANE/301269977/1308#ixzz0djUVa9LR

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