General Motors on Thursday said it could finance the restructuring of Opel without state aid, as its chief executive said the European subsidiary had enough cash to pay back a German government bridge loan.
Fritz Henderson, GM chief executive, said on Thursday that Opel could afford to pay back the remaining €900m ($1.3bn) of the €1.5bn bridge loan, which Berlin had extended to Opel in May to keep it afloat after GM entered Chapter 11 bankruptcy protection.
“While it has certainly been a challenging environment for us [Opel], the company has operated at or better than planned and so we have the resources to basically pay off the bridge loan,” Mr Henderson said.
His comments came two days after GM’s board decided to keep the Opel unit and its UK Vauxhall subsidiary instead of approving a sale of a majority stake to Canada’s Magna International and Russia’s Sberbank.
GM’s decision sparked furious reactions from the German and Russian governments, as well as Opel’s German workforce, which had all backed the Magna plan. Berlin responded by demanding the repayment of the bridge loan by the end of the month.
Several people close to the carmaker said Opel had amassed more than €1bn in cash in recent months, thanks mainly to the scrapping incentives for old cars launched by the German and other governments.
Mr Henderson also disclosed that GM could, if necessary, fund at least part of Opel’s restructuring from the US. As part of its bail-out by Washington earlier this year, GM was restricted from using cash from its domestic operations to support unprofitable overseas operations, such as Opel. But Mr Henderson said on Thursday that GM’s court-led restructuring gave it more leeway to fund overseas operations.
Mr Henderson said this would not necessarily take the form of a cash injection. He indicated that if European governments did not come up with funding, GM could lower or temporarily forego royalty payments from Opel. “We do have the ability to provide support directly, but that’s only if necessary,” he said.
The Detroit carmaker had said this week it would initially turn to the governments of Germany, the UK, Spain and Poland to provide the €3bn that it needs to sustain Opel-Vauxhall.
More details of GM’s plans to finance Opel emerged as the US carmaker’s U-turn caused further political backlash and anger among Opel workers in Germany. Klaus Franz, head of Opel’s works council, said “there won’t be a single cent’s worth of concessions from workers” to back GM’s restructuring plan. “The credibility of GM’s management is close to zero,” Mr Franz said at a protest rally of 10,000 workers in Rüsselsheim, Opel’s headquarters.
Mr Henderson acknowledged that the upheavals at Opel had strained relations with trade unions. “We have some fence-mending and repair that needs to be done,” he said.
Tags: bankruptcy, bridge loan, general motors
