By Chris Reiter and Andreas Cremer (Bloomberg) – General Motors Co., seeking European government aid to reorganize its Adam Opel GmbH division, pledged to invest 11 billion euros ($15 billion) at the brand by 2014 to develop new models and car-powering systems.
GM is asking for 2.7 billion euros in state loans or credit guarantees to fund cutbacks of 17 percent of Opel’s workforce and 20 percent of production capacity in the next two to three years, Opel Chief Executive Officer Nick Reilly said. The reorganization, including introduction of 12 models and the closure of a Belgian plant, would help the brand break even in 2011 and earn a profit in 2012, Opel said in a statement today.
Opel, based in the Frankfurt suburb of Ruesselsheim, has carmaking plants in Germany, the U.K., Spain and Poland and component factories in Hungary and Austria. The division has sought government help for an overhaul since November 2008 as Detroit-based GM struggled with global losses. The aid request includes 1.5 billion euros from Germany’s federal and state governments, according to two people familiar with the matter.
“We have no time to waste,” Reilly said today at a press conference in Frankfurt to present Opel’s business plan. He declined to specify amounts requested from each government, adding that the figures were roughly based on Opel’s headcount in each country.
Formal requests will test governments’ willingness to sustain Opel after GM decided in November to back out of an agreement supported by German Chancellor Angela Merkel to sell a majority stake in the brand to Magna International Inc.

Merkel’s Word

“The chances are good that Opel will get the money,” said Willi Diez, head of the Nuertingen, Germany-based Institute for Automobile Industry, a state-funded think tank. “The chancellor gave her word that she wanted to help Opel and a reversal would be too big a political risk.”
GM has spent 600 million euros reorganizing Opel and its sister brand Vauxhall in the U.K. Roland Koch, prime minister of the German state of Hesse, where Opel is based, said today that GM must “significantly increase” its contribution to Opel’s reorganization.
Opel plans to eliminate 8,300 of its 48,000 jobs across Europe and shut a car factory in Antwerp, Belgium. GM is also seeking 265 million euros a year in savings from unions, which are resisting plant closures and seeking a stake in Opel.
“Without collateral, there will be no concessions from workers,” Klaus Franz, the top labor leader at Opel, said today in a phone interview. “That’s a showstopper.”

Employee Dividend

Reilly said in December that an employee stake was under consideration. GM isn’t planning to sell any shares in Opel or offer a stake to outsiders as “they made a decision to keep 100 percent of the company,” Reilly told Bloomberg Television today. A special dividend for Opel’s workers would be considered when the unit posts a profit, the Opel CEO said.
Talks with unions will continue in parallel with government-level discussions, and Opel will probably need to reach an agreement with workers before being able to win state backing, Reilly said. Governments will be offered Opel assets as collateral for the financing.
The IG Metall union, which represents Opel’s manufacturing workers in Germany, called on the country’s officials to reject the aid request as long as GM proceeds with closing the Antwerp plant and doesn’t offer workers job security.
“We want Opel to be supported, when an appropriate plan is presented,” Armin Schild, an official with IG Metall and an Opel board member, said in a statement. “But we won’t support the plan as we know it.”

Eight Models

Opel plans to introduce eight models this year and four next year to renew 80 percent of its offering by 2012, Frank Weber, the carmaker’s production chief, said at the news conference.
Vehicles coming out this year include an updated Corsa subcompact, a revamped Meriva minivan and a new Movano delivery van. Opel plans to add the electric-powered Ampera car in 2011. The investment program includes 1 billion euros to develop fuel- efficient engines and electric-propulsion systems.
Discussions with governments on aid are likely to take “several weeks,” Reilly said. Opel has “sufficient liquidity” for operations during the talks, he said.
GM provided Opel with 650 million euros in fresh funding in January through accelerated payments for engineering work. The payments, which would have been due in April and July, were made to provide liquidity until the unit has more permanent funding.
The business plan, which includes potential exports to markets in Asia and the Middle East, was reviewed by Dusseldorf- based auditing firm Warth & Klein, which determined that the project is “sound and viable,” Opel said. It may be the carmaker’s last chance, as there’s “no Plan B,” Reilly said.

–With assistance from Cornelius Rahn and Michel Doermer in Frankfurt. Editors: Tom Lavell, Robert Valpuesta.

To contact the reporter on this story: Chris Reiter in Berlin at +49-30-70010-6226 or creiter2@bloomberg.net; Andreas Cremer in Berlin at +49-30-70010-6216 or acremer@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at +49-30-70010-6215 or kwong11@bloomberg.net

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