Monday, November 29, 1999

Opel withdraws European requests for state aid

News posted by

Opel on Wednesday turned its back on state assistance for its restructuring drive, abandoning months of talks with European governments and leaving parent General Motors[GM.UL] to fund the programme.GM's European arm said while its cash requirements were unchanged, the process of obtaining state aid was too slow and complex."We cannot afford to have uncertain funding plans and new time-consuming complex negotiations at this time when we need to keep investing in new products and technologies," Opel Chief Executive Nick Reilly said in a statement.The move comes as a surprise after GM for months insisted it needed European governments' help to restructure the loss-making European brand by slashing 20 percent of capacity and rejuvenating the bulk of the model range through end-2014.It also comes a week after Germany's federal government turned down Opel's request for Berlin to underwrite 1.1 billion euros of its borrowing."The decision of the German government ... was disappointing and means that the conclusion of these guarantees is again likely to be months away," Opel said on Wednesday.German Economy Minister Rainer Bruederle said he welcomed that GM was taking responsibility for its European arm, saying he hoped that Opel could now concentrate on making cars again."Opel has a future if GM doesn't gamble it away," Bruederle said following Opel's statement on Wednesday.GM had originally asked European countries with Opel plants -- including Spain, Britain, Austria, Hungary and Poland -- to contribute 2.7 billion euros ($3.3 billion) of the 3.7 billion euros needed but later promised to cover almost half of the sum."We appreciate the support indicated by certain governments, especially the UK and Spain, but we need to move on," Reilly said in the statement.The decision to fund restructuring internally does not mean there will be more job cuts and plant closures than previously announced, a spokesman for Opel said.FINANCIAL STRENGTHBruederle's decision last week not to back Opel's borrowings came just after Berlin unveiled an 11.2 billion-euro government savings programme.German Chancellor Angela Merkel last year made talks to save Opel and its 25,000 German jobs a priority in Berlin, brokering a deal to sell the carmaker to Canada's Magna .At the last minute GM decided to keep and restructure Opel rather than sell it.GM's turnaround from bankruptcy to profitability in just 12 months, which helped it hang on to Opel, has undermined the unit's efforts to win state aid.Excluding funds in escrow, GM had gross cash of $23.3 billion at the end of March compared with $14.2 billion in debt. Its first-quarter funds from operations exceeded capital expenditure by about $1 billion.Opel said its U.S. parent's improved financial strength was one factor in deciding to withdraw the aid requests.Reilly said Opel's total funding requirement was 3.3 billion euros and that additional funding needed from GM was 1.6 to 1.8 billion euros.(Reporting by Maria Sheahan; additional reporting by Jan Schwartz in Hamburg and Rene Wagner in Berlin; Editing by Greg Mahlich and David Cowell)
News posted by
Click here to read more news from
Please follow our blogs



No comments:

Post a Comment