Opel Gives Up Asking for Loans, GM to Fund It

In a somewhat surprising statement released yesterday, German carmaker Opel said it will no longer try to secure government loan guarantees from European governments and will, from now on, deal with its internal financial needs internally. The announcement comes less than a week after the German government denied Opel the €1.1 billion (US$1.2 billion) in loan guarantees it requested.

"We appreciate the support indicated by certain governments, especially the UK and Spain, but we need to move on,” Nick Reilly, Opel head said in the statement. “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."

Reilly adds that, despite this decision, Opel still needs money to implement its restructuring plan. This money, however, will come from within Opel and its owner, GM, a much more safer approach than waiting for European money. According to Opel, GM has enough money, due to its improved condition, to support the German unit.

“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," Reilly added.

"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,"

"Following this announcement, Opel/Vauxhall will be able to fully concentrate on the implementation of its growth plan, in particular the €11 billion investment plan into future products that was announced in February," Opel says.

According to the deal signed with its unions back in February, Opel will eliminate the one-off payment slated for the period May 1, 2010 - March 30, 2011. The planned 2.7 percent increase in wages for the metal and electric industry will be postponed until January 31, 2012, while the vacation and Christmas bonus will be reduced by 50 percent.
Production wise, the parties agreed upon the development and introduction of new products, including a new small car below the Corsa. In all, Opel plans to invest €11 billion in new products.
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About the author: Daniel Patrascu
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Daniel loves writing (or so he claims), and he uses this skill to offer readers a "behind the scenes" look at the automotive industry. He also enjoys talking about space exploration and robots, because in his view the only way forward for humanity is away from this planet, in metal bodies.
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