GM's Ace Up Its Sleeve: Less Government Support

Back in the summer, when General Motors was deeply involved in Opel sale talks with Magna International and RHJ International, the US-based manufacturer backed the latter because it involved less government support. General Motors recently canceled the deal of the German brand and is attempting to use the same weapon to repair its damaged image and convince government to provide support.

Reuters writes that GM's plans for Opel are including reduced government assistance, less than the initial forecast of 3.3 billion dollars it revealed a few months ago. At that time, GM said such a loan would be needed to keep Opel alive until 2011 but it might seem like the company has changed its mind.

The restructuring plan which is going to be submitted this week and presented to both the governments and labor unions is, according to sources familiar with the matter, a loan of about $2 billion. Additionally, General Motors would struggle to reduce costs by 30 percent within Opel, partially by cutting the royalty payments the German brand makes to the parent manufacturer.

But even so, General Motors would have to collaborate with governments across Europe and convince them that Opel still needs their money. While the UK has already expressed its support for General Motors and confirmed that offering state aid to the company is a likely scenario, Germany reacted in a negative manner and even required the US-based manufacturer to repay the initial loan the country granted to Opel.

"The government regrets the decision of the General Motors board to restructure Opel itself and to keep it in the group," Ulrich Wilhelm, a German government spokesman said last week after hearing GM's plan to retain Opel.