Page last updated at 09:35 GMT, Tuesday, 2 March 2010

GM pledges more money for Opel restructuring

GM and Opel logos
GM has been awaiting aid from the German government

General Motors says it will spend 1.9bn euros ($2.6bn; £1.7bn) to restructure its European unit Opel - three times more than it had first pledged.

GM estimates that Opel - which includes the UK's Vauxhall business - needs 3.3bn euros to be turned around.

The carmaker is now asking that European governments put up loans and guarantees worth 2bn euros, down from 2.7bn euros.

GM hopes to have Opel back to profitability by 2012.

The decision comes as GM said it will recall 1.3 million Chevrolet and Pontiac cars sold in the US, Canada and Mexico to fix power steering problems.

'Strong commitment'

"We have shared this decision with the European Commission as well as the national and state governments involved," said Opel chief Nick Reilly.

ANALYSIS
Jorn Madslien
By Jorn Madslien, Business reporter, BBC News, Geneva

Good news at the Geneva motor show is tempered by bad news out of the US.

GM hopes its investment of an additional 1.3bn euros in its European Opel/Vauxhall subsidiary will convince European governments to back its remaining funding requirements by guaranteeing loans.

But as GM recalls some 1.3 million models in the US, it seems reluctant to take responsibility for the faulty power steering, as the part in question was produced by a Toyota-owned subsidiary.

GM's willingness to pass the buck could further damage Toyota's image - or it could backfire as the affair turns into a mighty row that could involve the US and Japanese governments as well as their largest automotive groups.

"We hope that our strong commitment will be well received as a major milestone in our ongoing discussions about government guarantees to cover the remaining gap."

The carmaker had asked for about 60% of the total aid to come from the German government, on the basis that 60% of the company's employee costs of almost 50,000 are incurred in Germany.

Reports have said that Germany wanted more funding to come from GM before it committed to providing aid.

"Beyond the purely financial aspects, we see this as a major step towards instilling renewed trust and confidence into Opel/Vauxhall's customers, employees, business partners, unions, dealers and European governments," said GM chairman Ed Whitacre.

The relationship between Germany and GM has been difficult since the US firm decided to keep Opel rather than sell it to Canadian car parts maker Magna, which Germany had supported.

The new tripling of funds may be controversial. GM is 62%-owned by the US government since emerging from bankruptcy last year - meaning that more US taxpayer money is being spent in Europe.

Job losses

GM is cutting 8,300 jobs across Europe and is closing plants as it seeks to revive the brand.

No jobs will be lost at the Ellesmere Port factory in Cheshire, which employs 2,166 people and makes the Vauxhall Astra.

But last month it confirmed 360 jobs were to go at Vauxhall's Bedfordshire van plant, 150 from its administrative department and 369 posts would be lost at its Luton plant.

It also plans to invest 11bn euros "in a new product offensive" over the next five years

Opel plans to launch eight new models this year, and another four in 2011.



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FROM OTHER NEWS SITES
The Scotsman GM to treble funds for Opel and Vauxhall revamp to - 9 hrs ago
Telegraph More GM money into Europe - 11 hrs ago
New StatesmanGeneral Motors recalls 1.3m cars - 14 hrs ago
Guardian.co.uk General Motors recalls 1.3m cars in latest safety scare - 14 hrs ago
Management Today Magazine GM triples investment in Opel/Vauxhall overnight - 21 hrs ago
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