GM ready to cede control of Opel as European unit runs short of cash

By John Revill, Automotive News

Geneva. Switzerland -- General Motors Europe will run out of money in the second quarter unless European governments come quickly to the company's aid, COO Fritz Henderson said yesterday. Henderson also said GM is willing to give up majority ownership of Opel, the German brand it has owned since 1929.

"We have to be prepared to consider all options; nothing is off of the table. We have to be open to legitimate interest whether that is majority, minority or sharing," Henderson said at the Geneva auto show.

GM Europe, which includes Opel and its UK sister brand Vauxhall, lost $1.6 billion last year and needs 3.3 billion euros ($4.16 billion) in loans from European governments to fund a liquidity gap in the coming months. It cannot count on help from its U.S. parent, which lost nearly $31 billion in 2008.

GM Europe President Carl-Peter Forster said: "Our balance sheet is weak and we have no reserves. This crisis is too deep to weather on our own."

Henderson said GM Europe would run out of liquidity in the next few weeks. "In the second quarter, early in the second quarter," he said.

If GM does not get help from European governments "we will continue to run. We will try to stay alive, but it is not the best of scenarios," Henderson said.

"We have done a lot of work to see if we can continue to run, but none of these scenarios are the best scenarios," he said.

Forster said just trying to survive could lead to a massive reduction in employment.

GM Europe employs 300,000 people in Europe directly and indirectly through dealers and suppliers, he said, "There are elements that can be sustained, but you have to expect that most of most of these jobs would be gone."

GM is asking European governments where it has factories including Germany, Spain, Belgium and the UK for help.

The German government has said it will not be pressured into making a quick decision on granting state aid.

German Chancellor Angela Merkel has said a decision depended on the firm's long-term outlook and on the readiness of banks to help.

On Feb. 27, GM announced a plan to spin off Opel, including Vauxhall, into a unit which would be majority owned by its U.S. parent. It said outside investors would be offered a stake of more than a quarter.

Forster said government aid is the only option. "We have to be realistic. Negotiating with private investors will take months. We do not have that luxury."Henderson said GM has not spoken to any private investors about buying a stake in Opel. He said there is very little time before the company became insolvent.

From Automotive News (A Crain publication)