GM boss: US aid can be used to fix Opel if needed

DETROIT - General Motors Co. could tap some of the $50 billion in aid it has received from the U.S. government to help finance its plan to restructure its European Opel unit, GM's top executive said Thursday.


But CEO Fritz Henderson said it would do so only if necessary and would try to finance the $4.5 billion (euro3 billion) restructuring with loans from European countries, money generated by Opel and by reducing royalties that Opel pays GM for use of technology.

Henderson's statements come two days after GM's board shocked German leaders and labor unions by rejecting a plan to sell 55 percent of Opel to a partnership of Canadian auto parts supplier Magna International Inc. and Russian lender Sperbank.

The move angered politicians and labor leaders, who had expected the Magna deal to go through. Fearing widespread layoffs, thousands of Opel workers walked off the job across Germany Thursday in protest.

Just how much of the financing would come from European governments and GM will be the subject of negotiations that will get under way soon.

Henderson said GM is refining a plan to revive the struggling Opel and will present it soon to governments in Germany, Spain, Britain and Poland, as well as labor unions.

GM could be forced to fund the bulk of the plan through royalty cost rdutinsorevn irctai fomU.. peaton, utitis hopig to get most of the money from governments. Taking Opel into insolvency also is an option, although it is not preferred by GM.

Henderson said GM's first loan agreement with the U.S. government last December prohibited spending money anywhere but the U.S. However, aid granted in August after GM left bankruptcy protection allows money to be spent in other countries, he said.

"We certainly need to be prudent about it, be very careful about it, but we do have the ability to run a global business," he said.

He also said Opel's cash situation has improved with a recovering European auto market.

Henderson conceded that GM has a lot of work to do to fix its relationship with European labor unions. Unions agreed to cost concessions to make the Magna deal work but said it would withdraw them now that GM has nixed the deal.

The automaker has said it would cut about the same number of jobs as Magna would have, or about 10,500, or 20 percent of Opel's work force. Henderson would not give details of which plants would be closed.

GM also would have helped support the Magna deal through royalty payment reductions, said John Smith, the company's chief negotiator in the Opel restructuring. He said in an interview Thursday that GM has a greater chance of success in restructuring Opel than Magna because of its knowledge of the auto business and because it won't have to get other investors to agree with decisions.

"We will be better able to implement this plan," he said.


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