GM needs 3.3 billion euros for Opel revamp (Roundup)

Nov 11, 2009, 16:44 GMT

Berlin - Giant US carmaker General Motors Co will need about 3.3 billion euros (5 billion dollars) for the restructuring of its troubled European Opel offshoot, German Economics and Technology Minister Rainer Bruederle said Wednesday.

Speaking after talks in Berlin with GM vice president John Smith, Bruederle said the German Government expects the Detroit-based auto group to largely foot the bill for the Opel revamp.

He went on to call on GM to present its restructuring plan for Opel as quickly as possibly.

GM launched the fresh round of talks with the German government Wednesday as the company again came under fire from the nation's political leaders over its handling of Opel's future.

'The ball is now in GM's court and not in Berlin,' Bruederle said earlier in the day when he also roundly criticising the company over its delay in reaching a final decision on Opel.

Wednesday's talks came a week after GM announced that it was abandoning its plans to sell a majority stake in Opel a consortium comprising Canadian parts manufacturer Magna International, Russian state-owned Sberbank and Russian carmaker Gaz.

Instead, GM has decided to restructure the Opel unit itself with the company set to unveil its proposals for revamping its European unit in the coming weeks.

After strongly backing the sale to the Magna-led consortium, German Chancellor Angela Merkel lashed out at GM Tuesday telling parliament she regretted the carmaker's decision announced last week not to sell its European unit.

GM veteran Nick Reilly is to lead the revamp of Opel, which includes operations in Spain, Belgium, Poland as well as Britain's Vauxhall brand.

However, about half of Opel's 50,000-strong workforce is employed at 4 factories in Germany with Berlin having provided a 1.5-billion- euro bridging loan to help the group limp through its crisis.

GM has already said it wants to pay back the loan to Berlin by the end of November.

But GM is also in talks with Opel's unions about the details of the restructuring plan, which are expected to include slashing about 10,000 jobs across Europe.

'First of all we have to reach an agreement with the trade unions over the restructuring plan,' said GM chief Frederick 'Fritz' Henderson, who has also been holding talks in Germany this week on Opel.

In an interview with German state television Tuesday, Henderson also apologized for the sense of upheaval surrounding Opel's future.

But he rejected suggestions that the Opel might be forced to declare itself insolvent if its employees rejected making any concessions. 'Insolvency is not necessary and not likely' said Henderson.

Opel union leader Klaus Franz told state German TV Wednesday that GM might consider transforming its European unit into a publicly listed company.

While GM's likely job cuts are in line with Magna's plans for the GM offshoot, both German unions and the nation's political leaders fear that Germany's Opel operations could face bigger job cuts under GM as well as the closure of plants.

Magna had already announced plans to cut Opel workforce in Germany by about 4,000.

Another leading Opel union representative, Rainer Einenkel, also suggested Wednesday that the company could boost sales in Russia, Asia and the US.

Plunging car sales resulted in GM launching earlier this year a major makeover of its global operations, including selling off Opel.

But since then, the carmaker has emerged from bankruptcy and a new GM board has been appointed. Also, there are signs the economic crisis has abated for the global car industry and the world economy in general.

Moreover, the shift in the global market to smaller more energy efficient cars adds to the appeal for GM of retaining a controlling stake in Opel and the technology backing up its compact European car models.