(Reuters) - General Motors has abandoned the painstakingly negotiated deal to sell European arm Opel to a group led by auto supplier Magna, raising the ire of German politicians and labor leaders.
Here are some questions and answers on Opel’s future:
GM said it wanted to keep Opel because both the business environment and its own financial health and stability had improved. It also said its restructuring plan would cost less than the plans proposed by Canada’s Magna and other bidders.
GM expects restructuring to cost 3 billion euros ($4.4 billion), likely for job cuts and plant closures. In September, a financial adviser had told the board that keeping Opel could require additional cash of up to $6.1 billion. GM has not yet detailed its restructuring plan, which sees cutting fixed costs at Opel by 30 percent.
GM said that while Opel’s immediate liquidity is stable, “time is of the essence”. It did not give a formal timeline for its restructuring plans. Opel has to pay back by November 30 about 900 million euros that were part of a 1.5 billion euro bridge loan it got from German state banks.
GM Europe said the bulk of financing was to come from European loan guarantees. It wanted 4.5 billion euros in aid from Germany and other countries with Opel plants to make the Magna deal work, but the status of state aid is unclear now.
GM had $13.6 billion in an escrow account from the U.S. Treasury in October, but it cannot use those funds for its overseas operations without Washington’s permission.
Pressured by the European Union, Germany had to declare that its promise for loan guarantees was not contingent on GM picking Magna as a buyer. GM Europe said it was still counting on this aid to help Opel’s restructuring.
The European Commission said Berlin, which has not yet commented specifically on that matter, is not obligated under EU rules to live up to its earlier promise of aid.
WHAT DOES THIS MEAN FOR THE Labor AGREEMENT?
Magna and Opel’s workers agreed a restructuring package set to generate 265 million euros in annual savings but which was dependent on Opel’s sale to Magna. Labor leader Klaus Franz has now rescinded that agreement, which means GM is likely to have to start negotiating with workers from scratch.
Compiled by Maria Sheahan and Boris Groendahl, editing by Will Waterman $1=.6782 Euro