GM decides to give up on wait for German loan agreements

GENERAL Motors yesterday abandoned a months-long effort to win European government aid for restructuring its Opel and Vauxhall operations, saying that it needed to move ahead and would fund the overhaul itself.

A week after Germany rejected its request, GM said it was withdrawing applications for loan guarantees totalling 1.8 billion (1.5bn) from several European countries.

The car maker said its own improved finances were a factor in the decision. That will leave GM, which is majority-owned by the US government, to shoulder the total funding needs of 3.3bn rather than the 1.9bn it had previously committed.

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Opel and Vauxhall chief executive Nick Reilly noted that GM initiated the aid applications more than six months ago and said "we had no idea that it would take this long".

He added: "In that period of time, the GM financial position has improved somewhat and the outlook is positive."

The UK government committed loan guarantees to the tune of 270 million and Spain had indicated that it would commit a similar amount.

Reilly said there had been "no withdrawal of support" by either country, but GM made its decision after considering the fallout from Berlin's rejection.

The four German states where Opel has plants were willing to negotiate contributions. But continuing down that road would, according to Reilly, have meant "some pretty long bureaucratic processes and … we just can't afford that any longer; we need to put this behind us and get going."

Last November, GM abruptly cancelled the planned sale of a majority in the units – to a consortium led by Canadian car parts maker Magna International – instead deciding to restructure the brands itself.

That decision irked Germany, which had pushed hard for the sale and had been prepared to offer financial support for it.

GM then sought aid from European governments as it presented a restructuring plan for 8,300 job cuts across the continent. Reilly said: "There is no intention to change the restructuring plan."

The two brands employ about 48,000 staff in Europe.