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No Changes in Opel Game Plan as Result of Financing Fallout

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No Changes in Opel Game Plan as Result of Financing Fallout

By David E. Zoia

WardsAuto.com, Jun 16, 2010 12:07 PM

General Motors Co.’s decision to go it alone on financing a restructuring at its European operations won’t alter the auto maker’s path, Nick Reilly, president of GM Europe and chairman of the management board of Opel/Vauxhall, tells reporters in a conference call.

GM announced today it would abandon any efforts to seek some E1.8 billion ($2.2 billion) in government loans in Europe as a result of Germany’s reluctance to follow through on a proposed state-aid package.

GM already had secured €330 million ($407 million) in loan guarantees from the U.K. and a similar amount from Spain. But after a political tussle, Germany last week balked at providing the €1.1 billion ($1.4 billion) in additional backing the auto maker had been seeking.

Reilly says GM decided to turn down help from the U.K. and Spain because to complete the deals would have required too much additional time now that Germany is out of the picture.

“We would have had to break the whole thing up and go through some long bureaucratic process,” he says. “We can’t afford that any longer. We need to put this behind us and get going.”

Instead, GM will supply an additional €1.4 billion ($1.7 billion) in funding on top of the previous €1.9 billion ($2.3 billion) it had committed to the restructuring plan. Reilly says he is hoping to minimize the impact of that borrowing on the parent company by drawing down the money in stages.

The restructuring is going “a little bit slower than planned at the beginning,” he notes. “We’re keeping the Antwerp (Belgium) plant going longer, for instance, so some of the costs (are being pushed into) 2011. And there are other things we can do to delay a bit the requirements.”

There was some thought Germany’s pullout might drive GM to slash more jobs at Adam Opel GmbH headquarters in Russelsheim, Germany, or threaten the future of some local manufacturing operations.

Reilly: “We need to put this behind us.”

But Reilly says the recovery strategy will go unchanged.

“There’s no intention to change the restructuring plan,” he says. “It’s a good plan. We’re already embarked on the plan, and we think it’s the best plan for the company.”

Reilly says critics who contend the U.S. taxpayer, by way of the government’s 61% stake in the company, now will be forced to pick up the tab to save Opel should look at it this way:

“One important part of GM is its European operation. And if it is successful, GM will be more solid as a global manufacturer and it enhances the viability of GM. That’s why the decision was made to keep Opel (last year).

“(Having Opel) is better for GM, and it’s better for Opel to be in the company.”

It’s also likely any lingering doubts about GM’s future in Europe would have threatened the timing and potentially the degree of success of an initial public offering of stock. GM’s key constituencies – the U.S. and Canadian governments, United Auto Workers union and management – all appear anxious to launch an IPO, with most signs pointing to a fourth-quarter 2010 target.

With the restructuring money now secured, Reilly says Opel will be able to concentrate on its growth plan that calls for a separately funded €11 billion ($13.6 billion) to be invested in new products, including five to launch this year and seven due in 2011.

The list includes the Ampera extended-range electric vehicle, based on the Chevrolet Volt. It will launch in low volumes next year.

“We’re excited by that,” Reilly says. “If it goes as well as expected, we’ll build it in Europe, and (the plant in) Ellesmere Port (U.K) is a candidate.”

Reilly also says negotiations continue with commercial-vehicle partner Renault SA on a next-generation Opel/Vauxhall Vivaro based on the Renault Trafic. GM’s Luton, U.K., plant currently builds both models, but Renault is planning to move Trafic production to France.

“We are increasingly optimistic we’re going to continue with a next-generation Vivaro with Renault,” Reilly says. “Both companies are progressing with the intention of getting a deal. And I expect something by the end of July or the beginning of August.”



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