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Opel Still Lacks Government Funding of €2.7 billion

GM unveils reorganization plan in bid to influence politicians.

by on Feb.09, 2010

GM is still running the Euro political slalom in hopes of loans before it runs out of cash.

The Chief Executive Officer of  loss making Opel/Vauxhall, Nick Reilly, today announced what he claims is a five-year €11 billion “Plan for the Future” that he says will update 80% of Opel/Vauxhall vehicle lines.

Reilly also said today that the external auditor, Warth & Klein, called the plan “sound and viable.”

Opel formally applied for loans or loan guarantees from the German government at the same time.

As part of the plan, Opel owner General Motors is looking for €2.7 billion through loans or loan guarantees from European politicians. Thus far the Europeans appear content to let U.S. taxpayer-owned and subsidized GM carry the burden without the involvement of European taxpayers.

This is a showdown not unlike the one GM faced in the U.S. when it sought government aid, that after much posturing, was eventually forthcoming. However, it took a bankruptcy to accomplish, something that is not being seriously discussed thus far, or at least publicly, in Europe for Opel.

GM has been seeking money from European governments since the fall of 2008 when it was becoming clear that it along with its subsidiaries were insolvent.

When it canceled the sale of Opel last fall to Magna and decided that Opel was strategically too important to the world’s second largest automaker, GM clearly placed itself in a weakened bargaining position.

“We have no reason to doubt that we will win support from those governments that have an interest in a long-term and sustainable future of Opel/Vauxhall, which in turn will provide long-term security for several thousand jobs across Europe,” a GM spokesperson told TheDetroitBureau.com. “We have been in very constructive talks with all European governments with Opel/Vauxhall sites and are confident that we will win support for our plan.”

GM has already injected €600 million into the new Opel/Vauxhall business. In addition, GM provided €650 million in advanced payments in January to ensure Opel solvency.

Critics claim that the only reason GM had the cash for such a transfer of funds is because U.S. and Canadian taxpayers have given it $50 billion. (Click here for that story.) They also note that the European Union central government is vehemently against bailouts of automakers, although it readily pumped billions into banks and other financial institutions last year.   (more…)