Opel applies for 1.5 billion euros in aid from Germany (Roundup)

Feb 9, 2010, 12:16 GMT

Frankfurt - General Motors' European subsidiary Opel has officially applied for 1.5 billion euros (2.1 billion dollars) in state aid from Germany to help it restructure its troubled car- manufacturing business, executives said Tuesday.

Tough negotiations lie ahead. US conglomerate GM is seeking a total of 2.7 billion euros in state aid from various European nations for a restructuring plan that will see it axe 8,300 jobs from the current Opel workforce of 48,000.

German Economics Minister Rainer Bruederle responded that officials would study the application 'carefully.' He added that the European Commission would have to assess what aid to Opel was legal.

Despite the cloud over the brand, Opel and Vauxhall cars have kept a loyal following among buyers, especially in Germany.

But the company said Tuesday it must cut its manufacturing capacity by 20 per cent to return to profitability.

Last month Opel confirmed it would shut down its factory in Antwerp, Belgium, where about 2,600 people reportedly have jobs.

In Germany, 3,900 positions will be eliminated, Opel chief executive Nick Reilly told a Frankfurt news conference.

Bruederle said he had agreed with other business ministers in December to let Brussels officials check the plan so as to avoid governments trying to outbid one another with offers of help.

Opel said it was up to the Germans to decide what share of the state aid would be borne by the federal government and what share by four German states where Opel factories are located.

Much of the money is expected to be spent on helping employees into new jobs or early retirement.

The company is also demanding that remaining staff accept cuts in their remuneration packages, saving Opel 265 million euros annually. Trade unions oppose this, saying Opel cannot guarantee any return for the sacrifice.

GM called off plans last year to sell much of Opel to a Russian- Canadian consortium which had won promises of state aid. GM said it would seek similar assistance to that negotiated by Magna, the lead company among the would-be buyers.

Reilly said the company planned new investments of 11 billion euros in the period up to and including 2014 so that it could update 80 per cent of its range of models.

The job cuts set out by Reilly for Germany were slightly fewer than the 4,000 he had foreshadowed days earlier.

The brunt, or 1,799, will be borne by a plant at Bochum in Germany's heavy-industry belt which is to be downsized but will continue to make one model, the Zafira compact family car.

At the main Ruesselsheim factory near Frankfurt, where Opel has its head office, the cuts will reduce the workforce by 862. Roland Koch, premier of Hesse state where that office is located, shot back that GM had to invest a higher sum of its own money in restructuring.

The other cuts will be at Eisenach in eastern Germany (300) and at an engine plant in Kaiserslautern (300), while 650 white-collar jobs at various offices will also go, according to Reilly.