GM boasts enough cash for Opel GmbH

LONDON: General Motor Co's Adam Opel GmbH division has cash reserves of about $2.5 billion, enough to last the unprofitable business "well into the first quarter", according to Nick Reilly, the European unit's acting chief.

A restructuring plan for Opel is likely to be reached with workers and European governments in about three weeks, Reilly said at a London press briefing. Cuts needed to stem losses will amount to as many as 10,000 jobs and about 25 percent of output, or slightly less than the capacity of three plants, he said.

"We can't let the situation linger," Reilly said. "We need to get on with restructuring. Across Europe we need to take out quite significant capacity."

GM decided earlier this month to keep Opel rather than sell a majority stake to a group led by Magna International Inc. While a slimmed down Opel will still face a difficult 2010 as incentives to scrap older cars and buy new ones tail off, the unit should be close to breaking even in 2011, Reilly said, reiterating GM guidance from Sept 10 regarding Magna's plan.

Reilly spoke after what he said was a "positive" meeting with UK Business Secretary Peter Mandelson on the future of Opel's Vauxhall-brand plants. There may be a way to reduce the 800 British job cuts that Magna had sought, the executive said.

Mandelson said in an e-mailed statement that he's upbeat about the future of the Ellesmere Port and Luton factories and that Britain is "prepared to underwrite" the financial support that GM wants. The Detroit-based company said on Nov 13 that it's likely to seek European government aid for a portion of the 3 billion euros ($4.4 billion) needed to overhaul Opel.

Short-term funding

Reilly said that Opel will be restructured "based on what we think is doable", and that "in general" there is no bidding contest between governments to keep plants open. The funding required is "more short term" and won't be tied to production capacity in any one country, he said.

Meetings with Opel's unions have so far been positive, Reilly said. The projection for how long the unit's cash will last is based on maintaining investment at current levels, with GM planning to retain all of the Opel product range, he said.

Germany's government supported Opel's sale to Magna and pledged 4.5 billion euros in aid. The backing drew criticism from those, who said Chancellor Angela Merkel's government may have improperly influenced GM's initial decision to accept Magna's bid.

About half of Opel's 50,000 employees work in Germany, and the division operates plants in Spain, the UK, Belgium and Poland. The EU called a recent meeting to guard against countries competing with subsidies to protect Opel jobs, the Rheinische Post newspaper cited sources as saying.

Bloomberg News

(China Daily 11/23/2009 page11)