Money Matters, Simplified.
GM pledges 1.9 billion euros to restructure Opel, Vauxhall
by Jaspreet Virk - March 2, 2010 - comments
GM has pledged to invest 11 billion euros in Opel over the next five years to develop new models. Opel is planning to launch eight new models this year and four others in 2011.
In a move to turnaround its struggling Opel and Vauxhall units, General Motors (GM) said Tuesday that it would triple the funding in these units.
The Detroit, Michigan-based company has originally pledged to contribute 600 million euros to reorganize its Opel unit in Germany, and Britain-based Vauxhall. Now GM says that it will put in 1.9 billion euros or $2.6 billion instead.
The additional amount of money “should clearly signal our determination to fix our business,” said Opel’s Chief Executive Officer Nick Reilly.
It is “a vote of confidence in Opel/Vauxhall’s long-term business strength,” said the company.
The total amount planned to restructure the units have been raised by 415 million euros to 3.7 billion euros.
The company’s contribution will partly be in the form of loans to its subsidiaries.
GM asks less from governments
GM, the largest U.S. automaker, will be asking the European governments to contribute less than 2 billion euros in the form of loan guarantees, compared to 2.7 billion euros asked earlier.
The company had initially asked that around 60 percent of the total funding should come from the German government.
But the German government had asked GM to “raise its commitment to Opel as a condition to provide state aid,” stated Marc-Rene Tonn, an analyst at M.M. Warburg in Hamburg.
“GM is moving in the right direction and this should mean restructuring at Opel can get under way sooner,” Tonn added.
Company optimistic about future
GM had earlier this month pledged to invest 11 billion euros in Opel over the next five years to develop new models. Opel is planning to launch eight new models this year and four others in 2011.
The company is also planning to shut factory in Antwerp, Belgium and cut 8,300 jobs across Europe in order to revive its brand.
It is expected to announce its plans to revamp its sales and marketing operations to recapture the North American market.
At the same time, GM will be recalling Chevrolet and Pontiac vehicles to fix problems related to power steering motors.
Further, Opel, based in Ruesselsheim, Germany, has set up target to break even in 2011 and generate profits in 2012.
GM is hoping to soon reach an agreement with the workers before it attracts funding from the governments.