Rüsselsheim, Germany – General Motors has decided to withdraw all applications in Europe for government loan guarantees for its Opel/Vauxhall division, and supply funding itself.
The company said that while the funding requirements set out seven months ago in its viability plan have not changed, the process for requesting government guarantees proved to be more complex and took longer than expected, and the results are not certain. GM said that its recently-improved financial strength has also been a catalyst for making the decision.
Last week, the German economy minister said that he would not approve the automaker’s request, saying that the U.S. company had enough money to support its European division.
“We appreciate the support indicated by certain governments, especially the U.K. and Spain, but we need to move on,” said Nick Reilly, president of GM Europe. “The decision of the German government last week was disappointing and means that the conclusion of these guarantees is again likely to be months away. To be clear, our funding needs have not changed, and we were led to believe that loan guarantees made available to other European companies under the EU program to help offset the impact of the global economic crisis would be equally available to Opel/Vauxhall. But after a very long process defined by governments, this has turned out not to be the case.
“We are grateful for the decision and support of our parent company, which will allow us to move forward with confidence in this very competitive industry. We cannot afford to have uncertain funding plans and new time-consuming complex negotiations at this time when we need to keep investing in new products and technologies. With these new products and the impact of restructuring, we expect to return to profitability shortly.”
As part of a European-wide request, the U.K. government had committed €330 million in guarantees for bank loans, with a similar amount indicated from Spain. The total amount requested from all European governments had been approximately €1.8 billion.
GM said that two weeks ago, Opel/Vauxhall had signed agreements with its European employee representatives for restructuring the company, labour cost savings, and for commitments to product investments. These agreements are not tied to government guarantees.