GM: We'll foot the bill for Opel ourselves

NEW YORK (CNNMoney.com) -- General Motors has withdrawn requests for loan guarantees from various European governments to help restructure its Opel division there. Instead, GM said, it will invest the necessary funds itself.

GM Europe had requested a total of €1.8 billion, or $2.2 billion, from countries where it has operations including Germany, where Opel is headquartered, Spain and the United Kingdom.

• Email
• Print
• Comment

The 2009 Opel Insignia is also sold in China and the U.S. under the Buick brand name. In the U.S., it's sold as the Buick Regal.

Last week, the German government denied GM's request for €1.1 billion, or $1.4 billion, to help finance the restructuring.

The UK and Spain had each already committed to back some bank loans, GM said, but those requests have now been withdrawn.

GM had originally agreed to contribute €1.9 billion ($2.3 billion) to Opel's restructuring, but will now commit a total of €3.3 billion, or about $4 billion.

GM had submitted its requests for the government loan guarantees six months ago, said Nick Reilly, president of GM Europe, on a conference call. The process took much longer than Opel executives had anticipated, he said.

"In that period of time, the GM financial position has improved somewhat and the outlook is positive," he said.

In May, GM announced a quarterly profit of $865 million. GM had previously said it did not have any more money to invest in Opel's restructuring.

The funds for GM's investment will come from "a mix of our own cash and borrowings," Reilly said.

While some may object to GM stepping in where the German government wouldn't, considering that the carmaker was only recently bailed out by the U.S. government, it's in GM's best interests to fund the restructuring, said Reilly.

"The U.S. government is a 61% holder of GM," Reilly said. "One very important part of GM is its European operations."

GM had also said that it would invest €11 billion ($13.5 billion) in new product development for Opel over the next five years, and said in its announcement that it willl maintain that commitment.

Opel, which also includes the British Vauxhall brand, plans to cut approximately 8,300 jobs in Europe as part of the planned restructuring.