Opel Withdraws State Aid Requests; GM Will Finance Restructuring Itself

By Chris Haak

Less than a week after the German government declined to provide the state aid that Opel requested to partially fund its restructuring, GM’s European arm has decided to withdraw all requests for state aid.  Instead, the automaker will fund its €3.6 billion restructuring program with money from the parent company, according to GM Europe CEO Nick Reilly (pictured).

Though the company did not say so, most of the change of heart is probably an attempt to shed the “loser” image that Opel increasingly seems to find associated with itself, as its initial request for aid dates back prior to GM’s bankruptcy, or more than a year ago.  In the ensuing months, Opel has begged, pleaded, and cajoled Berlin – not to mention other European capitals and other German state capitals – to open the purse strings to improve Opel’s competitiveness, from a cost and a product standpoint.

Now, basically acting upon German Economy Minister Rainer Bruederle’s advice that the company pay for its own restructuring (and proving him correct, that it seemingly can be done with internal resources), GM will fork over the funds necessary to close the Antwerp, Belgium assembly plant, cut about 20 percent of its European workforce, and

So if GM can pay for the Opel restructuring itself, why bother asking for aid, and the subsequent hoop-jumping, ass-kissing, and political machinations?  For one, when the initial request was made, GM’s financial situation was much more tenuous.  Even six months ago, the world had still not seen any clean GAAP financials from post-bankruptcy GM, so nobody knew how sick, or how healthy, the US-based parent company was.  The situation has now changed for the better, though GM’s future success and future avoidance of bankruptcy is still far from certain.  Second, since GM is still majority owned by the US taxpayer, having the parent company fund what amounts to a bailout of a foreign company (and non-US workers).

But Opel’s vehicles and engineering expertise (particularly in the small/mid market segments that are the bread-and-butter of the European, and increasingly, the US market) are critical to GM’s vehicle-development initiatives, at least in the medium term.  GM is still a global automaker, and with its primary development center for these vehicles still residing in Europe, much institutional knowledge would be lost if Opel were shuttered or sold.  That’s exactly why a newly-emboldened GM backed out of a tentative deal to sell Opel to Magna last year in the first place.

Longer term, GM could lose Opel and re-construct that organization’s talents elsewhere around the world, specifically in China or the US.  But that would take years, and for the company to have any hope of building competitive products in the segments that Opel specializes in for the short- and medium-terms, it needs to hold onto its troubled European arm.  Plus, how can a so-called global automaker not operate in one of the largest new-vehicle markets in the world?

The reason, by the way, that GM gave for now withdrawing all state aid requests is that the drawn-out aid process has proven a distraction, and added uncertainty to its European operations.  There is certainly some validity to that as well, but my humble opinion is that the company feels that it’s politically beneficial to drop the request in Europe, and to pay for it with what is really mostly US taxpayer money.  Now, perhaps, GM can strut around Europe claiming to be bailout-free the way Ford has been able to do very successfully in the US.

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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