GM is “very disappointed” that the German government has thrown out a request for 1.1 billion euros of state aid for Opel, but has vowed to fill the funding gap with other borrowings.
“I am struggling to understand the thinking behind this decision, and we are very disappointed after such a very long process,” said Opel/Vauxhall chair Nick Reilly.
A committee of four experts was split 50/50 over the loan, leaving German economy minister Rainer Bruederle with the casting vote.
Reilly said he disagreed with the two main reasons – that it wasn’t the role of EU governments to support the car industry and that GM has enough money to fund Opel on its own.
“Last year the EU supported the auto industry to the tune of 8.5 billion euros and Opel received none of that. That’s EU governments supporting the car industry,” said Reilly.
The recent crisis in the Eurozone and German bail-out of Greece, were significant contributing factors, he added. “If we’d been doing this earlier in the year, I think we’d have had a different outcome,” said Reilly.
GM now expects to find funding itself and to stick to the restructuring and investment plan outlined earlier this year.
Reilly believes that GM “probably” could fund Opel on its own.
“But we’re looking for funding to keep going through this very low market we find ourselves in.”
GM has already helped out its European subsidiary this spring when its financial position improved faster than expected.
In March it unexpectedly pumped in 1.9bn euros to pay for a restructuring plan that made 5000 staff redundant.
A solution to finding 1.1bn to fund new models and technology has been suggested by the German government — find support from the four German lande, the federal states where Opel has facilities.
But that looks likely to supply only half the required sum: “Had we known that this was the route, we would have gone there rather than apply to the government as instructed,” said Reilly.
GM will have to make up the shortfall with cash at commercial rates, which will make its borrowings much more expensive, eroding its future competitiveness.