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Germany rejects bid for state aid for Opel

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Germany rejects bid for state aid for Opel

Staff and

and Wire Reports June 9, 2010 17:31 CET

Germany's Economy Minister Rainer Bruederle said on Wednesday he has rejected a bid by carmaker General Motors Co. for state aid for its European unit Opel.

Bruederle said he made his decision after a steering committee assessing the aid request failed to reach a unanimous position, adding that he was convinced GM had enough money to complete an overhaul of Opel.

"GM and Opel are very disappointed," Opel CEO Nick Reilly said in a press conference following the decision. "I don't really understand the decision."

GM had asked for some 1.1 billion euros ($1.5 billion) in guarantees for the carmaker to help finance a 3.7 billion-euro reorganization that includes cutting Opel capacity and work force by a fifth and closing a plant in Antwerp, Belgium.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100609/ANE/306099953/1308#ixzz0qNC9d4vl

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Blow for GM as Berlin rejects Opel aid request

(AFP) – 2 hours ago

BERLIN — Germany dealt General Motors a major blow on Wednesday as Berlin turned down a request for 1.1 billion euros (1.3 billion dollars) in loan guarantees for its loss-making Europe unit Opel/Vauxhall.

Economy Minister Rainer Bruederle said he had rejected GM's application for help for Opel from a special fund set up to help firms hit by the recession because the US auto giant had enough funds itself.

"I am confident that Opel has a good future without credit guarantees," Bruederle said.

"GM is naturally very disappointed, as is Opel, with this decision," GM Europe chief Nick Reilly told reporters. "I don't particularly understand the reasons why."

But the door to public money may not be definitively closed to the Detroit giant, which emerged from bankruptcy and posted its first quarterly profit in three years in the first three months of 2010.

German Chancellor Angela Merkel on Thursday was set to discuss possible options with the heads of the four German states where Opel has four plants and employs some 23,000 workers, around half the European total.

"We understand that the Laender, the federal states of Germany, have been very supportive of Opel and of our application in the past, and it is quite possible, I understand, that we might be able to achieve some of the same end through guarantees from the states," Reilly said.

GM is prepared to pump 1.9 billion euros into its restructuring plan, which foresees around 8,000 job cuts, and wanted 1.8 billion euros in loan guarantees from European governments including the 1.1 billion euros from Germany.

Reilly said that the government in Britain, where GM owns Vauxhall, had agreed to provide around 330 million euros in guarantees and that he was confident Spain would offer around the same amount.

He said that Berlin's decision would not affect GM's restructuring plans.

"It's certainly my objective to carry out the plans we have," he said.

Unions, which fear that GM will now close some of its German plants, immediately slammed Bruederle's decision, with Opel works council chief Klaus Franz calling it "shameful."

"The economy minister is leaving Opel staff standing in the rain, counter to the facts and counter to the interests of the plants in Germany," Franz said.

Germany was ready last year to provide guarantees to Opel if GM sold it to Canadian auto parts maker Magna and Russian lender Sberbank, but GM scrapped the deal in October, annoying Berlin in the process.

Merkel, whose popularity has fallen sharply in recent months, is seen as wary to hand out more taxpayers' money after promising tens of billions of euros in guarantees to prevent a eurozone collapse.

Merkel "would have difficulty justifying aid for Opel," said Stefan Bratzel, head of automobile research at Germany's University of Applied Sciences (FHDW) in Bergisch Gladbach.

link:

http://www.google.com/hostednews/afp/article/ALeqM5gQ2cqOy-RUH9uCDOhdX6ZrSCGq3w

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GM reviews options after Germany turns down loan request

Christine Tierney and Robert Snell / The Detroit News

General Motors Co. will pursue other sources of financing in Germany after Economy Minister Rainer Brüderle turned down the U.S. automaker's request for federal loan guarantees for its Adam Opel GmbH carmaker.

"GM is very disappointed, as is Opel, with this decision," said Nick Reilly, president of GM Europe and chief executive of Opel.

But he said GM would seek loan guarantees from German states with Opel plants or from other federal funding programs.

In an encouraging sign, Chancellor Angela Merkel said Wednesday that "the last word naturally has not yet been spoken" regarding aid to Opel.

GM had requested loan guarantees totaling more than $1.2 billion from Germany to help fund a restructuring of Rüsselsheim-based Opel expected to cost a minimum of $4 billion.

Reilly told reporters he did not believe the decision was in retaliation for GM's sudden move last year to scrap a German government-backed plan to sell Opel.

"I think it's more to do with a general political and economic situation," Reilly said on a teleconference. "We've been caught up in the current political and economic difficulties in the country."

This week, Merkel's government announced plans to cut nearly $100 billion out of the federal budget through 2014 after helping to bail out Greece.

With GM back in the black, many people in Germany say the U.S. automaker should cover Opel's restructuring costs.

Reilly said GM was already prepared to cover a large part of the expense. "Remember," he said, "that they are operating largely because of U.S. taxpayers' money, so they have to be careful about what they spend outside the United States."

Reilly said Brüderle told him Wednesday that GM could apply for funds from different programs. He said the states had expressed more support, but Reilly added that "I don't think the amount will be the same."

GM has lined up loan guarantees totaling around $720 million from Spain and Britain and is in talks with Poland and Austria.

Asked about Opel's financial condition, Reilly said there was no risk of bankruptcy this year and he expected GM to carry the German carmaker through 2010.

He said he didn't expect a need for more plant closures or concessions from workers beyond what has been announced.

Last month, GM reached an agreement with Opel workers that will slash its labor costs by $332.5 million.

Workers agreed to give up a one-time bonus and accept reduced vacation and Christmas bonuses. They also agreed to the postponement of a previously negotiated 2.7 percent salary hike.

The decision today could disrupt Opel's product development program but will not affect the restructuring, Reilly said.

"We might delay a bit, or wait until we are generating more money ourselves," he said. "But not in terms of any of the major products."

GM recently announced plans to develop and produce an all-new small Opel car.

From The Detroit News: http://www.detnews.com/article/20100609/AUTO01/6090379/1148/GM-reviews-options-after-Germany-turns-down-loan-request#ixzz0qNkzXeQ1

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Germany rejects aid for GM's Opel

BERLIN (AP) — Germany on Wednesday rejected General Motors' request for aid from the federal government for its Opel unit, saying the U.S. automaker had enough funds to pull its subsidiary through.

The decision by Economy Minister Rainer Bruederle, came just days after Germany announced a plan to cut public spending and reduce the deficit, and denied GM of more than 1.1 billion euro in loan guarantees.

But Chancellor Angela Merkel insisted that "the last word on the future of Opel naturally has not been spoken." She added that she would seek assistance from governors of states that host Opel sites in talks with them on Thursday.

A committee that examines aid requests from a fund for companies hit by the economic crisis failed to reach a decision on the case — putting the ruling in the hands of Bruederle, who turned it down.

"I am optimistic that the future of [Opel] can function without government aid," Bruederle said, adding that it was GM's responsibility to see to it that its subsidiary is swiftly restructured.

"I am convinced that GM has sufficient funds," he said.

Opel CEO Nick Reilly expressed disappointment at the decision, adding that "I don't particularly understand the reasons why."

He expressed hope that the four German states that host Opel plants could come up with between 25 and 50% of the rejected sum.

"I will do everything in the talks with the governors so that the employees who have committed themselves to the preservation of Opel get the possible help and support that is at our disposal," said Merkel.

Reilly noted that the states "have been very supportive of Opel and our application in the past."

Roland Koch, governor of Hesse, which is home to Opel's largest plant, in Ruesselsheim, expressed regret over Bruederle's decision and said he would carefully review any application for assistance.

Bruederle, a member of the pro-business Free Democrats— the junior partner in Merkel's center-right coalition — has long been skeptical about the merits of government aid to Opel.

The state government in Thuringia, which hosts Opel's Eisenach plant, last month sought to pressure the federal government by approving in principle to guarantee credit to the tune of 27.2 million euro.

In March, former British Prime Minister Gordon Brown's government said Britain would give a $390 million loan guarantee to GM. Reilly said that Spain was expected to pledge a similar sum, adding that Poland and Austria may also join in, .

"It would end up leaving us with something like 400 million euro to find," Reilly said, adding that the were no plans for further job cuts or other "employee contributions."

The rejection puts GM in a tricky political position. It's committed to saving Opel and if the aid from the states didn't come through, it would be forced to use U.S. taxpayer dollars to restructure its European operations. That would be a tough sell in the United States, where bailout-weary taxpayers and politicians want their money back.

Last November, GM abruptly canceled the planned sale of a majority in Opel to a consortium led by Canadian auto parts maker Magna International, instead deciding to restructure the brands itself.

That decision irked Germany, which had pushed hard for the sale and had been prepared to offer financial support.

Fast-forward to May, when GM reported an $865 million first-quarter profit, its first positive quarter in three years. The profit came as global auto sales started to recover and despite a $506 million loss in Europe, the only place GM lost money.

GM sought European government aid for Opel and sister brand Vauxhall earlier this year as it presented a restructuring plan that foresees some 8,300 job cuts in Europe.

The two brands employ around 48,000 people in Europe, roughly half of them in Germany.

Opel's top employee representative was witheringly critical of Bruederle's decision.

"The economy minister is leaving the Opel employees out in the rain — against his better knowledge and against the interest of the German sites," Klaus Franz said in a statement.

link:

http://www.usatoday.com/money/autos/2010-06-09-germany-opel_N.htm

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Germany rejects bid for state aid for Opel

June 9, 2010 - 11:31 am ET

UPDATED: 6/9/10 1:59 p.m. ET

BERLIN (Bloomberg) -- Germany rejected General Motors Co.'s request for 1.1 billion euros ($1.3 billion) in aid for the loss-making Opel unit, forcing GM to seek other alternatives for the division's reorganization.

“I'm convinced GM has sufficient financial resources,” Economy Minister Rainer Bruederle told reporters in Berlin today, in explaining why he turned down GM. “The state is not the better entrepreneur.”

Bruederle said the automaker has about 10 billion euros in free liquidity after fully paying back credits from the U.S. and Canadian governments.

GM has been seeking 1.92 billion euros in aid from European countries to fund a restructuring that includes closing a factory in Antwerp, Belgium, as it eliminates 8,300 of Opel's 48,000 jobs. Europe was the only region where GM posted a loss in the first quarter. The carmaker recorded a $865 million net income in the period.

"GM and Opel are very disappointed," Opel CEO Nick Reilly said in a press conference following the decision. "I don't really understand the decision."

Germany's refusal throws into question how GM will fund the 3.6 billion-euro reorganization after abandoning an agreement backed by German Chancellor Angela Merkel to sell a majority stake in Opel to Magna International Inc. last November.

During the 18-month wrangling over Opel's future, which included bids from Italian automaker Fiat SpA and RHJ International SA, Opel and its U.K. brand Vauxhall have struggled to retain customers.

Opel has already benefited from a bridge loan from Germany last year as well as the government's “cash-for-clunkers” program, Bruederle said, adding he made the final decision after an advisory committee failed to make a unanimous recommendation.

Market share decline

Opel's European market share dropped to 7 percent from 7.6 percent in the first four months of 2010, even though the carmaker late last year introduced a new version of the Astra, its best-selling model, according to statistics from the European Automobile Manufacturers' Association.

“Opel's drawn-out efforts to secure state aid has created a huge image problem,” Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen, said prior to the announcement. “That loser image is going to stick.”

German lawmakers expressed concern about granting GM money as Merkel's government pushes ahead with planned budget cuts of more than 80 billion euros over the next four years.

An outside advisory panel to the government that included former Schering AG CEO Hubertus Erlen and Michael Rogowski, the former head of Germany's main industry lobby group BDI, last week recommended that Germany turn down GM's application.

‘Better position'

GM filed for bankruptcy protection in June 2009 and emerged a month later with Ed Whitacre as chairman. He took over as CEO in December and has shuffled management and cut brands to four from eight. The company has since then repaid $8.4 billion in U.S. and Canadian loans it assumed as it emerged from bankruptcy.

“GM is in a much better position in economic terms now than a year ago,” Bruederle said. “All told, I'm confident that the future of Opel can be secured without state aid.”

In addition to the German aid request, Opel is seeking 333 million euros in guarantees from the U.K., 437 million euros from Austria and Spain combined and 50 million euros in project financing from Poland, a PricewaterhouseCoopers report last month commissioned by the German government and obtained by Bloomberg News showed.

Opel still has the backing of the four German states where it has operations, which may help open the way for international capital-market financing for new technology, Klaus Franz, the head of the division's works council, said today in an e-mailed statement.

Opel said in its Feb. 9 business plan that 4,000 of the 8,300 jobs to be eliminated would take place in Germany. The Russelsheim, Germany-based division seeks to break even in 2011 and return to profit by 2012.

Read more: http://www.autonews.com/article/20100609/COPY01/306099951/1193#ixzz0qOJZOfZd

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GERMANY REJECTS GM’S REQUEST FOR OPEL AID

By Drew Johnson

General Motors’ Opel brand recently secured $358 million in funding from Spain’s central government, but the ailing automaker’s turnaround plan was thrown into doubt on Wednesday as Germany rejected GM’s request for $1.3 billion.

GM is seeking about $2.3 billion from various European governments to fund Opel’s turnaround plan, but the German government’s decision to reject the automaker’s request for aid could put that plan in jeopardy.

“I’m convinced GM has sufficient financial resources,” Economy Minister Rainer Bruederle, a Free Democrat, told reporters in Berlin today, in explaining why he turned down GM. “The state is not the better entrepreneur.” GM posted a $865 million profit during the first quarter of 2010.

Germany previously pledged to help Opel with its turnaround plan, but took back its offer after GM decided to cancel Opel’s sale to Magna. That decision could cost GM as it is now facing a huge financial shortfall.

Opel’s European market share slipped from 7.6 percent to 7 percent during the first quarter, despite the launch of a new version of the company’s Astra model.

LINK:

http://www.leftlanenews.com/germany-rejects-gms-request-for-opel-aid.html

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Germany denies GM loan request

'Disappointed' carmaker reviews options to get loan guarantees for its ailing Opel unit

Christine Tierney and Robert Snell / The Detroit News

General Motors Co. is scrambling to line up financing for its ailing Adam Opel GmbH carmaker after Germany's federal government on Wednesday rejected its request for loan guarantees.

"GM is very disappointed, as is Opel, with this decision," said Nick Reilly, president of GM Europe and chief executive of Opel.

But he said GM would seek loan guarantees from German states with Opel plants or from other federal funding programs.

In an encouraging sign, Chancellor Angela Merkel said Wednesday that "the last word naturally has not yet been spoken" regarding aid to Opel.

GM had asked the German government for more than $1.2 billion in loan guarantees to help fund a restructuring of Rüsselsheim-based Opel expected to cost at least $4 billion.

Reilly told reporters he did not believe the decision announced by Economy Minister Rainer Brüderle was in retaliation for GM's move last year to scrap a German government-backed plan to sell Opel.

"We've been caught up in the current political and economic difficulties in the country," Reilly said. "I would not call this retribution."

Europe is struggling with a debt crisis. This week, Merkel's government announced plans to cut nearly $100 billion out of the federal budget through 2014 after helping to bail out Greece.

With GM back in the black, many Germans wonder why the U.S. automaker isn't willing to pay for Opel's restructuring.

Reilly said GM was already prepared to cover a large part of the expense. "Remember," he told an audience of mostly European reporters, "that they are operating largely because of U.S. taxpayers' money, so they have to be careful about what they spend outside the United States."

A year ago, Merkel's government was ready to provide $6.6 billion in loans to facilitate a takeover of Opel by Canada's Magna International Inc.

Brüderle, who became economy minister last October, has been opposed to bailing out Opel. Reilly said he understood that the final call was Brüderle's.

But he said the minister told him in a phone call Wednesday that GM could apply for funds from other programs.

Opel has assembly plants in four German states -- North-Rhine Westphalia, Thuringia, Hesse and Rhineland-Palatinate. Those states have expressed support for Opel but may not be able to provide the same amount of loan guarantees sought from Germany's federal government.

GM says it has bank lenders but can't borrow money without loan guarantees. It has lined up around $720 million in guarantees from Spain and Britain and is in talks with Poland and Austria.

"This thing seems like it's never going to come to fruition at the rate it's going," said George Magliano, an auto analyst with IHS Global Insight. "At the end of the day, there's probably going to be more people being cut, more overhead being cut."

Asked about Opel's financial condition, Reilly said there was no risk of bankruptcy this year.

He said he didn't see a need for more plant closures or concessions beyond what has been announced. GM reached an agreement with Opel workers last month that will slash its labor costs by $332.5 million.

In addition to the uncertainty that has weighed on the brand, Opel is struggling this year in a very tough market.

European auto sales are expected to contract by 10 percent, with Germany likely to suffer an even bigger decline after providing generous cash-for-clunkers incentives last year. German new car sales fell 35.1 percent in May.

The latest setback could disrupt Opel's product development program -- including an all new small Opel car recently announced -- but will not affect the restructuring, Reilly said.

From The Detroit News: http://detnews.com/article/20100610/AUTO01/6100366/1148/Germany-denies-GM-loan-request#ixzz0qSepjN8G

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