GM Europe in talks for government aid

Carl-Peter Forster is under no illusion about what needs to be done and that could mean the closure of three factories. Photo / AP

GM Europe was negotiating with Spain, Britain and other European governments beyond Germany to get the US$4.2 billion ($8.3 billion) it felt it needed to keep operating, General Motors officials said at the Geneva motor show.

GM's German-based Adam Opel unit has been in talks with the German Government for financial support, but the GM officials made it clear that the company wanted to merge its European operations into a single entity in order to take the cash infusion it needed to keep going.

Among GM Europe's subsidiaries are Germany's Adam Opel, Britain's Vauxhall and Sweden-based Saab, which has been placed in bankruptcy protection.

"We are talking to governments outside of Germany. Obviously, it started in Germany. We have half of our employment in Germany, most engineering capacity is in Germany. We have approached other governments," said GM Europe president Carl-Peter Forster.

Forster said GM Europe had been in talks with Spanish authorities, who have committed to loan guarantees, and received "positive signals" from British officials. He said there were talks with other governments as well, but did not name them.

The German Government has said it won't be rushed into a commitment.

GM chief operating officer Fritz Henderson said part of the process to get its European operations back on its feet would be creating a European entity.

"An investment in Opel Germany doesn't make sense. We need to create a European entity ... it's not terribly difficult," Henderson said. "Our business needs to be looked at as a European business."

Forster said the company needed to achieve cuts of US$1.2 billion as part of the plan it was presenting to governments. That could be most easily achieved by closing three factories, he said, noting capacity utilisation was 30 per cent below normal levels.

"It could be by far the best solution to just close plants. Our labour representatives have asked us to consider other measures," Forster said. They include voluntary resignations, salary cuts and work reductions.

"But make no illusions," Forster said. "It is not easy to get to the US$1.2 billion that we need to achieve. This is a lot of money we need to save to get our business viable."

Forster said GM Europe was convinced that with governments' help it could return to profitability by the end of 2011, assuming success of the new product line, which includes a range of models low on carbon emissions as well as the new Opel Ampera, an electric vehicle with an extended range from a gas-powered engine.

But Henderson said if the money was not forthcoming, GM Europe operations could fail in the second quarter.

"Use your imagination. We would become insolvent at that time," Henderson said.

That could cost 200,000 to 300,000 jobs between Opel workers and related suppliers and dealers.

- AP