GM to treble funds for Opel and Vauxhall revamp to £1.72bn

GENERAL Motors is to more than treble its planned funding for the turnaround of its European units Vauxhall and Opel to 1.9 billion (£1.72bn).

The car giant had initially pledged 600 million and hoped to also get around 2.7bn in European government funding for the restructuring of the businesses, but that prospect had been looking increasingly unlikely in recent weeks.

GM will instead be asking European nations for less than 2bn in the form of loan guarantees.

The company said its higher contribution in the form of equity and loans would remove the risk of potential liquidity shortfalls during Vauxhall and Opel's restructuring this year.

GM abruptly abandoned a plan to sell the majority of Vauxhall and Opel to investors late last year, instead choosing to keep the European brands.

"GM's commitment is the right course of action and should clearly signal our determination to fix our business," said Nick Reilly, the chief executive of Vauxhall and Opel. "Our call for the additional funding was approved by GM's senior management and supported by the board. We have shared this decision with the European Commission as well as the national and state governments involved."

The company said it also hopes the commitment is seen as a step towards "instilling renewed trust and confidence to its customers, employees, unions and business partners".

About 8,300 jobs will be lost across Vauxhall and Opel's European operation by 2011 as part of the restructuring.

Around 500 Vauxhall job losses in the UK have been announced, with 369 at the Luton van-making factory and 154 sales and back- office roles throughout the country. The Ellesmere Port factory on Merseyside, which makes Vauxhall Astras, has so far escaped redundancies.

GM briefly slipped into US bankruptcy protection last year as consumers tightened their belts amid the global economic crisis, causing the worst downturn in car sales in decades.

Backed by more than $50bn in US government aid, it has slashed costs, cut 34,000 jobs, eliminated $78bn of debt and built up a cash pile of almost $43bn.

GM has said it would repay the entire $8.1bn loan portion of its debt to the US and Canadian governments by June. Earlier this year, it sold its Swedish brand Saab to Spyker, the Dutch supercar maker, for 46m.

Separately, GM yesterday announced it would recall 1.3 million cars in North America over a potentially faulty power steering motor. Models covered by the recall include Chevrolets and Pontiacs. GM said the vehicles are safe to drive and never lose steering, but they may be harder to steer when travelling at very low speeds.