GM Europe will run out of cash ‘early in the second quarter’ of 2009, unless the divison secures $3.3bn in funding from European governments.
Speaking today (Tuesday 3 March), GM chief operating officer Fritz Henderson revealed that insolvency loomed, due to the plunge in European car sales and GM’s liquidity crisis in North America. He ruled out a swift cash injection from private investors, saying that no talks had taken place and that lengthy negotiations and due diligence would take too long.
European governments – including Germany and Britain’s - are being asked to provide loans and loan guarantees, to prevent the company lapsing into insolvency. In return, the governments would take an equity stake in the restructured business.
Henderson and GM Europe boss Carl-Peter Forster suggested that plants face closure, as the division undergoes a massive restructuring like its parent company, General Motors.
Forster said that the German government had received a restructuring plan this week, outlining upcoming product and an overhaul of the division, designed to restore profitability by 2011.
‘We need $1.2bn annually in labour costs savings. But it’s certain that we have to restructure: that’s the basis of our business plan,’ said Forster.
‘We have about 30 percent overcapacity, which equates to about three plants,’ he added.
Some 300,000 jobs are on the line, both directly at Opel/Vauxhall and indirectly in the supply chain and dealership network, and billions in R&D money. ‘If Opel is allowed to falter, most of these jobs will go,’ said Forster. ‘But we have a plan that is sound and measurable, although some of the restructuring measures will be painful.’
‘Will the car industry come out of this stronger or weaker?’ he asked. ‘Only politicians have the answer.’
The GM officials said that the Vauxhall brand itself was not under threat, with the Griffin brand’s performance making the UK GM Europe’s biggest sales market. Like other plants, the Ellesmere Port factory, near Liverpool, has a question mark hanging over it, although Forster stated that the plant had already tooled up for this year’s new Astra.
Meanwhile, Saab is in reorganisation, with officials desperately seeking funding from the Swedish government and European Investment Bank to keep it afloat while new investors are sought. ‘If Saab is not able to reorganise it goes into bankruptcy,’ warned Henderson. But he promised that GM would support Saab with the parts and technology it needs to bring the new 9-5 saloon and 9-4X SUV to market, assuming the Swedish company secures funding.