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GM to inject $2.7B into Opel

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GM to inject $2.7B into Opel

The Detroit News

General Motors Co. will contribute 1.9 billion euros, or $2.7 billion, in financing for its struggling German carmaker Adam Opel GmbH -- more than three times its previous investment pledge, Opel said today.

With this contribution, GM will provide just more than half of the funding of Opel's estimated requirements of $5.2 billion. Nick Reilly, CEO of Opel and its British operations, Vauxhall, said GM's contribution would be in the form of equity and loans.

Opel/Vauxhall had estimated its funding requirements at 3.3 billion euros, or $4.6 billion. However, governments had estimated it would need around $600 million more to offset deteriorating market conditions.

GM is now reducing the loan guarantees it is seeking from European governments with Opel operations by nearly a third, to 2 billion euros, or $2.8 billion.

After deciding to keep Opel last year, and ruffling the German government, which had previously offered aid, GM has had to arrange new sources of financing for the Ruesselsheim, Germany-based carmaker.

"GM's 1.9 billion euro commitment is the right course of action for Opel/Vauxhall and should clearly signal our determination to fix our business," Reilly said. "Our call for the additional funding was approved by GM's senior management and supported by the GM board of directors.

"We have shared this decision with the European Commission, as well as the national and state governments involved. We hope that our strong commitment will be well received as a major milestone in our ongoing discussions about government guarantees to cover the remaining gap."

"It is of vital importance for GM to demonstrate our commitment for our European operations," Ed Whitacre, GM chairman and CEO, said in a statement.

"Beyond the purely financial aspects, we see this as a major step towards instilling renewed trust and confidence into Opel/Vauxhall's customers, employees, business partners, unions, dealers and European governments."

From The Detroit News: http://www.detnews.com/article/20100302/AUTO01/3020395/1148/auto01/GM-to-inject-$2.7B-into-Opel#ixzz0h1txWzr0

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GM to triple funding for Opel restructuring

By George Frey, AP Business Writer

FRANKFURT — General Motors said Tuesday it would more than triple its funding for the turnaround of European units Opel and Vauxhall to 1.9 billion euros ($2.6 billion).

General Motors had initially pledged 600 million euros and hoped to get some 2.7 billion euros in European government funding for the restructuring of its important European units, but that had been looking increasingly unlikely in recent weeks.

GM will now be asking European nations for less than 2 billion euros in the form of loan guarantees.

General Motors abruptly abandoned a plan to sell the majority of Opel and Vauxhall to investors late last year, instead choosing to keep the European brands for itself.

GM said its higher contribution in the form of equity and loans removes the risk of potential liquidity shortfalls during Opel's and Vauxhall's restructuring this year.

"GM's 1.9 billion euro commitment is the right course of action for Opel and Vauxhall and should clearly signal our determination to fix our business," Nick Reilly, the chief executive of Opel and Vauxhall, said in the statement.

"Our call for the additional funding was approved by GM's senior management and supported by the board," he said. "Meanwhile, we have shared this decision with the European Commission as well as the national and state governments involved."

The company said it also hopes the commitment is seen as a step toward instilling renewed trust and confidence to its customers, employees, unions and business partners.

The funding will be used to help pay the costs of shutting down the Antwerp factory "in a socially acceptable way," make investments for future products, and to boost Opel's liquidity, Opel spokesman Stefan Weinmann said at the Geneva Auto Show.

The funding, in the form of cash and loans, is mostly targeted for 2010 and will go toward Opel's viability plan, "which will put the company on solid, long-term sustainable footing," he said.

Among other projects, Opel will use the funding to invest in the Opel Ampera, the extended-range electric-driven family car that is the sister of the Chevy Volt, which Opel plans to launch at the end of 2011.

The car was on Opel's stand at Geneva along side the concept Flextream GT/E and the Meriva.

Weinmann said that GM had been constrained in making investments outside of the United States because of the loans it had received from the U.S. government, but "has regained trust" by repaying $1.2 billion in December.

GM has said it would repay the entire $8.1 billion loan portion of its debt to the U.S. and Canadian governments by June.

After that, GM would still owe the U.S. government $45.3 billion, and it intends to repay much of it when GM stock is sold to the public, perhaps late this year.



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GM says it will invest 1.9B in Opel/Vauxhall revamp

Paul McVeigh

Automotive News Europe -- March 2, 2010 06:01 CET

UPDATED: March 2 11:13 CET

General Motors Co. said it will contribute 1.9 billion euros ($2.57 billion) toward the restructuring of Opel/Vauxhall, more than tripling its previous investment pledge of 600 million euros.

The GM contribution would be made in the form of both equity and loans, Opel CEO Nick Reilly said on Tuesday.

GM's increased investment means Opel will have enough cash to operate through the year. It had previously said it had enough liquidity to operate well into the second quarter.

It could also help GM to win state aid for Opel's restructuring from European governments, particularly Germany, where Opel is based. The Berlin government has been demanding that GM inject more money into its European operations.

Opel said on Tuesday that GM has cut its request for state aid and is now asking the governments for less than 2 billion euros. It has also increased the total restructuring budget at the request of the governments.

"An additional 415 million euros had been requested by the respective European governments to offset the potential impact of adverse market developments," Opel said.

That raises the cost of restructuring Opel to about 3.7 billion euros, which Opel said would remove any potential liquidity risks this year. At the same time, GM is now asking governments to contribute less than 2 billion euros in aid versus the 2.7 billion euros it previously wanted.

"We hope that our strong commitment will be well received as a major milestone in our ongoing discussions about government guarantees to cover the remaining gap," Reilly said in a statement.

GM's plan for Opel envisages 8,300 job cuts factories across Europe, shuttering the Antwerp, Belgium, plant as well as 20 percent capacity cuts and a return to profit by 2012.

Germany -- where half of Opel's staff work and which was supposed to provide the majority of aid -- had been cool to the idea of giving taxpayer funds into Opel.

GM last year scrapped plans to sell Opel and asked European governments and workers to contribute to the cost of returning the carmaker to profitability.

GM had originally asked European countries with Opel plants -- including Germany, Belgium, Britain, Austria, Poland and Spain -- to contribute 2.7 billion euros of aid.

"It is of vital importance for GM to demonstrate our commitment for our European operations," GM Chairman and CEO Ed Whitacre said in a statement.

Labor representatives have criticized GM's plans to shut Antwerp and rescinded their promise to contribute 265 million euros in annual cost concessions.

Reuters contributed to this report

Read more: http://www.autonews....3#ixzz0h25Bd4lV

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