Germany will reject Opel aid but explore funding options, sources say
Chancellor Angela Merkel opposes granting Opel aid from a government rescue fund set up to distribute loans and assistance to companies affected by the credit crisis, said the people, who asked not to be identified because the matter is not public. Her government is examining options to help Opel, including seeking European Investment Bank funding, they said.
A steering committee for aid assistance will reject GM's application for 1.1 billion euros ($1.3 billion) in federal and regional government loan guarantees because GM has enough cash to restructure Opel and the unit's problems were caused by model failures at the U.S. parent, not the financial crisis, said the people.
The committee, led by Deputy Economy Minister Bernhard Heitzer, will meet in Berlin later today, they said.
GM has been seeking 1.92 billion euros in aid from European countries to fund a reorganization 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 profit in the first quarter.
Billions in free liquidity
“The first responsibility for Opel very clearly rests with GM,” Economy Minister Rainer Bruederle told German public broadcaster ARD television, adding that GM has about 10 billion euros in free liquidity after fully paying back credits from U.S. and Canadian governments. “GM is able to reorganize itself through its own funds.”
A refusal by Germany would throw into question how GM will fund the 3.6 billion-euro reorganization of Opel after abandoning an agreement backed by Merkel to sell a majority stake in the unit to Magna International Inc. last November. During the 18-month wrangling over Opel's future, which included bids from Italian automaker Fiat S.p.A. and private equity firm RHJ International SA, Opel and UK sister brand Vauxhall have struggled to retain customers.
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, one of its best-selling models, according to statistics from the European Automobile Manufacturers' Association.
German lawmakers have 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.
European Investment Bank is the lending arm of the European Union. In February, Saab Automobile, the GM unit that was taken over by Spyker Cars NV, was given a 400 million-euro technology development loan from the Luxembourg-based lender.
EIB Vice President Eva Srejber wasn't immediately available for comment.
GM filed for bankruptcy protection in June of last year 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.
Aid from elsewhere
In addition to the German aid request, Opel is seeking 333 million euros in guarantees from the UK, 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 said in its Feb. 9 business plan that 4,000 of the 8,300 jobs to be eliminated would take place in Germany. The Ruesselsheim-based division seeks to break even in 2011 and return to profit by 2012.