Germany Declines to Give Opel State Aid

By Chris Haak

GM’s troubled European subsidiary, Opel, requested €1.1 billion ($1.3 billion USD) in state aid to help fund its expensive €3.6 billion restructuring program. Opel already has the support of its largest works council vis-à-vis plant closings, and also has secured aid from four of the German states in which Opel has plants.

According to German Economy Minister Rainer Bruederle, the aid request was turned down mainly because he feels that parent company GM has enough financial wherewithal some 18 months after Opel’s future was thrown into doubt that it could fund Opel’s restructuring on its own.  Also, Chancellor Angela Merkel’s government has recently announced austerity measures that did not sit extremely well with the public in an effort to save €80 billion over the next four years.  Dropping 1.4 percent of the required savings in aid to Opel, where Germany didn’t think there was a dire need, would have likely proven politically unpopular.

Opel has struggled to win customers over the past 18 months as its future prospects have been clouded by bids from Fiat, Magna, and RHJ International.  GM wanted it, didn’t want it, and then decided to keep it in the long run, backing out of a preliminary agreement to sell the money-loser to Magna with German aid.  Regardless of what happens to Opel, it needs a swift resolution, or buyers are going to continue to flee the brand.  Opel’s European market share has plunged from 7.7 percent over the first four months of 2009 to 7.0 percent in the first four months of 2010, in spite of having launched an all-new model of its bestselling Astra compact (pictured above).

According to documents that Bloomberg News, Opel is also seeking €333 million in guarantees from the U.K., €437 million from Austria and Spain combined and €50 million in project financing from Poland.  The documents that Bloomberg saw came from a report commissioned by the German government and done by PricewaterhouseCoopers.  Altogether, the company has requested €1.92 billion in aid from European countries.

In some ways, GM has become a victim of its semi-success.  Post-bankruptcy, it has a reasonably-healthy balance sheet and is in a better cash position than it has been in for years.  But GM Europe was the only region in which the global automaker lost money in the first quarter of 2010, which proves the need to proceed with restructuring.  GM can’t consider itself a global automaker if its main European arm shuts down (although its fellow European automakers would love to see Opel disappear from the market, which would reduce some of the excess production capacity plaguing Europe), so smart money is on GM stepping up and funding the restructuring with its own cash.

Author: Chris Haak

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

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