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Posted by: Anthony Lim

General Motors yesterday abandoned a months-long effort to win European government aid for restructuring its Opel and Vauxhall operations, saying that it needed to move ahead and would fund the overhaul itself.

A week after Germany rejected its request, GM said it was withdrawing applications for loan guarantees totaling euro 1.8bil (US$2.2bil) from several European countries. The automaker said its own improved finances were a factor in the decision.

That will leave GM, which is majority-owned by the US government, to shoulder the total funding needs of euro 3.3bil rather than the euro 1.9bil it had previously committed. The US government owns about 61% of GM, while the Canadian governments own roughly 12%. GM hopes to repay all government aid with a public stock offering, perhaps later this year.

GM's move ends lengthy manoeuvring over the future of Opel and Vauxhall, and represents a sharp turnaround from last year, when GM nearly sold a majority stake in its European operations and went through bankruptcy reorganisation in the US. It subsequently decided to hold onto its European business while seek government support.

Opel and Vauxhall CEO Nick Reilly noted that GM initiated the aid applications more than six months ago and said "we had no idea that it would take this long."

"In that period of time the GM financial position has improved somewhat and the outlook is positive," he said - helping make Wed's decision possible.

Britain's government committed loan guarantees to the tune of euro 330mil and Spain had indicated that it would commit a similar amount. Reilly said there had been "no withdrawal of support" by either country, but GM made its decision after considering the fallout from Berlin's rejection.

Last Nov, GM abruptly canceled the planned sale of a majority in the units to a consortium led by Canadian auto parts maker Magna International, instead deciding to restructure the brands itself.

That decision irked Germany, which had pushed hard for the sale and had been prepared to offer financial support for it.

GM then sought aid from European governments as it presented a restructuring plan that foresees some 8,300 job cuts across the continent. Reilly said "there is no intention to change the restructuring plan." The two brands employ around 48,000 people in Europe, roughly half of them in Germany.
- AP