Europe seeks specifics on GM's plans in region

BERLIN/FRANKFURT Fri Mar 6, 2009 2:23pm EST

The logo of Opel is shown on the radiator grill of Insignia car during the second media day of the 79th Geneva Car Show at the Palexpo in Geneva March 4, 2009. REUTERS/Arnd Wiegmann

The logo of Opel is shown on the radiator grill of Insignia car during the second media day of the 79th Geneva Car Show at the Palexpo in Geneva March 4, 2009.

Credit: Reuters/Arnd Wiegmann

Related Video

Video

Opel future in the balance

Fri, Mar 6 2009

BERLIN/FRANKFURT (Reuters) - Europe called for clarity on crisis-hit carmaker General Motor Corp's plans for assets in the region, with a German minister saying insolvency could be an option for Opel.

As turmoil sweeps the sector, Continental AG's chairman quit in a row with its biggest shareholder, Schaeffler.

With carmakers dragged down by a sales slump, the future of GM's European assets, especially German brand Opel, remained up in the air. German Interior Minister Wolfgang Schaeuble said Opel should not rule out an insolvency filing.

"The public perception is that insolvency is associated with going bust or bankruptcy. But that is wrong," he said in a newspaper interview. "We must grasp that to survive such a crisis, modern insolvency rules are a better solution than the state taking a stake".

GM's Swedish brand Saab has already sought protection from creditors.

GM Europe submitted a rescue plan for Opel last week under which the German unit along with UK-based Vauxhall would be partly spun off. It said the independent unit would need 3.3 billion euros ($4.2 billion) in state aid.

German Economy Minister Karl-Theodor zu Guttenberg met Opel and GM executives on Friday and said it will take several weeks to decide whether to give state aid.

A spokeswoman for GM UK said the group would be in contact with the British government about its potential role in the future of Vauxhall, which has 5,000 workers in two plants and which has so far insisted it does not need cash from the state.

The British government pledged 2.3 billion pounds ($3.3 billion) in loans to its car industry earlier this year, but manufacturers and industry bodies have complained they have not been told how to access the cash.

The industry is due to meet Business Secretary Peter Mandelson next week in an open seminar to discuss the issue.

LASHING OUT

The European Union's executive had on Thursday called for a meeting of member states affected by GM, saying the carmaker was not informing the bloc of its problems.

GM Europe's senior labor leader, Klaus Franz, lashed out at management, accusing executives of outbidding each other on job cut targets and scaring away politicians who didn't want to be seen using taxpayer money to fund large-scale staff reductions.

Elsewhere Hubertus von Gruenberg resigned as chairman and supervisory board member of automotive supplier Continental, after the board met to discuss its future with controlling shareholder Schaeffler.

Schaeffler, whom von Gruenberg had served with in the past as an adviser, took a direct stake of almost 50 percent in Continental and transferred another 40 percent to banks to ensure it remains a minority shareholder under a deal it struck last year to end a bitter takeover row.

But the deal blew a 6 billion euro hole in its balance sheet, just as it needs to make a 900 million euro interest payment this year on the syndicated loan financing the deal, and the family owners stand to lose control of the group.

Von Gruenberg, who was expected to supervise and accompany the carve-out of Conti's Rubber Group, attacked Schaeffler after his last board meeting as chairman.

"In my opinion, Schaeffler's conduct has clearly violated the spirit of the investor agreement reached between the two companies," he told reporters.

GRIM PICTURE

Continental said labor representative Werner Bischoff, its deputy chairman, would lead the board until a new chairman can be elected. Schaeffler adviser Rolf Koerfler had been slated to become chairman, though this was held up by a court injunction.

Germany's Robert Bosch said it was not in talks to buy part or all of Schaeffler, after a newspaper report said it had signaled interest in Schaeffler's profitable industrial business.

February volumes at Daimler's passenger car business underlined the grim industry picture. Mercedes-Benz Cars reported a 25 percent decline in unit sales.

In a further sign of the turbulence affecting automotive suppliers as new car demand plummets, at least three major tire makers canceled long-term contracts to buy Indonesian rubber.

Dealers said SMPT, the rubber purchasing arm of Michelin, Yokohama Rubber and Continental AG told suppliers they had to abandon the contracts.

U.S. parts maker BorgWarner Inc said it would suspend its 12 cents-per-share quarterly dividend to maintain financial flexibility while the economy remains mired in a slump.

Japan's Mitsubishi Motors Corp slashed production at its Thai plant by 60 percent and delayed production of an eco car which had been due to begin in late 2010.

South Korea's number two automaker Kia Motors Corp said it planned to issue 400 billion won ($384.3 million) worth of three-year bonds with warrants to shore up its balance sheet.

(Additional reporting by Reuters bureaus; Writing by Helen Massy-Beresford and Mike Shields; Editing by Andrew Macdonald and David Holmes)

($1=.7909 euros) ($1=1040.8 won) ($1=.7030 Pound)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.