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Healthy GM may dash Opel's hopes for cash

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Healthy GM may dash Opel's hopes for cash

Posted 2010/05/19 @ 04:00 AM

By Myles Kornblatt

Opel may have to put its hands back into its pockets.

It is nothing new to hear that the German subsidiary of General Motors is looking for financial aid. Opel has spent the last few months asking its local government for € 1.3 billion to help cover GM’s € 3.7 billion plan to restructure its entire European operations. Now that journey may be at a disappointing end.

It seems the GM’s health may be a major stumbling point to receiving German aid. GM announced earlier this week that it earned $863 million in the first three months of 2010 (it lost $6 billion Q1 of 2009.) This has led German officials to suggest the GM may be able to foot the entire bill for its European restructuring plan.

Most major news sources seem to agree that Opel will be forced to reorganize without the help of its local government. The Financial Times Deutschland quoted Michael Fuchs, the deputy head of the Opel’s parliamentary hearing, as saying, "The month-long discussion about funding for Opel now has to be stopped for good."

The only one who still seems to be holding on to hope of state aid is Opel. In a statement earlier today the company said:

“Opel has not received any negative indication from the guarantee committee about our application. We believe we have a legitimate and valid case to seek for loan guarantees under existing aid programs. We trust the process will continue as planned and be based on an objective assessment of the application.”

If the funding doesn't come Opel's way it will mean GM will need to find more cash for Europe. Spending more than € 1 billion than originally planned will likely create the kind of shockwave we'll feel in North America.

THE REST OF THE STORY

Back in November of 2009, GM started to show the first signs of its financial rebound. It was also assured a GM-owned Opel would be eligible for German government loans. That motivated GM to take Opel off the bargaining table. This same decision to not sell Opel may have also soured GM’s relationship with the German government, who favored a sale to Magna.

So possibly a decision based on the eligibility of government loans may have just made the government not want to give the loan.

It is too soon to tell if going without government aid will be a bad thing for GM/Opel. After all if the company can weather the storm of the next few years on its own, then it will have performed its own Wirtschaftswunder (economic miracle).

link:

http://www.motobullet.com/news.php?id=10248

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