GM's Europe brands survival dependent on state aid

HAMBURG/STOCKHOLM (Reuters) - General Motors's European brands are near collapse, with Germany's Opel in need of substantially more funding and Saab reported to be asking for $590 million from the Swedish government to help it restructure.

Filing for protection from creditors on Friday, Saab said it would present a reorganization proposal within three weeks while court filings revealed that it estimated its losses in 2008 and 2009 at around 3 billion Swedish crowns ($340.1 million).

"Saab will formulate its proposal for reorganization, which will include the concentration of design, engineering and manufacturing in Sweden," it said in a statement, adding that the reorganization would take three months and require independent funding.

The very first European carmaker to seek a government bailout since the crisis began, Opel now requires a total of 3.3 billion euros ($4.15 billion) in liquidity to survive according to a company source, and has already returned to Berlin with a higher request after first applying for 1.8 billion euros in loan guarantees.

A sharp deterioration in European car markets means that Opel now estimates Berlin would need to guarantee 2.5 billion euros in loans, the person said.

A source at the German government said Opel had explained the situation could become dramatic by March with its cash tight and a threat looming of balance-sheet insolvency.

Responding to a Spiegel article that first broke the news of a higher funding request, GM said its second-largest brand after Chevrolet had fallen victim to a collapse in market conditions that could not be predicted last November such as painful weakening in the pound and ruble and a plunge in sales in Spain.

"It is the clear responsibility of the management of Adam Opel GmbH to portray a realistic picture and consider the changes in European markets when asking for state loan guarantees," GM Europe said in a statement.

"Management has always communicated openly with the (economic ministry's) loan guarantee committee and all other parties and will continue to do this in the future."

The company could not be reached for comment.

News of the higher funding needs could seriously weaken political supporters such as EU Industry Commissioner Guenter Verheugen, who have argued in favor of support, conjuring images of Hypo Real Estate.

The German property lender, famous for its no-risk covered bonds business, has received more than 100 billion euros after multiple funding shortfalls were discovered month after month at its Irish unit Depfa, sparking a controversial debate over the group's nationalization.

HOSTILE TAKEOVER

Meanwhile, Swedish business daily Dagens Industri reported that GM would pump 3.5 billion crowns ($397 million) into Saab in exchange for Stockholm granting a far larger 5.2 billion crown loan to the carmaker.

Saab's court-appointed administrator will reorganize the brand into a fully independent entity in the hopes of finding an investor after the Swedish government repeatedly ruled out owning a carmaker.

The crisis has come at a tough time for Saab just as it is about to launch a trio of badly-needed new models like the upcoming 9-5, that were set to rejuvenate its elderly product range.

"We explored and will continue to explore all available options for funding and/or selling Saab," its managing director, Jan Ake Jonssson, said in a statement.

Saab hasn't posted a profit since 2001, prompting GM product guru Bob Lutz to say it was on "life support" that has bestowed GM with nothing more than an "unending string of losses."

Separately, the chairman of Italian tire maker Pirelli told the Financial Times he would consider a fresh bid for Continental's tire business.

"It's too early to say ... it could be interesting to analyze it but only if it's a friendly transaction," Chairman Marco Tronchetti said on Friday in an interview with the Financial Times.

In the early 1990s, Pirelli had sought to acquire Continental but its attempts failed after coordinated opposition from Chief Executive Hubertus von Gruenberg, Lower Saxony state premier Gerhard Schroeder and Deutsche Bank.

(Writing by Christiaan Hetzner, additional reporting by Stephen Jewkes in Milan; Editing by Rupert Winchester)