Opel/Vauxhall funding plan due 'within weeks'

Talks with EU members about loans are moving fast
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The Independent Online

Opel/Vauxhall expects finance talks with European governments to be concluded within "a small number of weeks", allowing the embattled car-maker to move ahead with restructuring plans that will cut 20 per cent of its production capacity.

Alongside efforts to set up at least €1.9bn (£1.7bn) of state loan guarantees, the European arm of the US giant General Motors is also working on plans for a profit-sharing arrangement with staff. The scheme – offering a 10 per cent share of Opel/Vauxhall profits once the company is securely back in the black – will help to compensate workers for the five-year programme of cuts needed to cut costs in the aftermath of the recession.

Earlier this month, the Brititsh government agreed a €300m loan guarantee to support Opel/Vauxhall and detailed talks are also under way with Spain, Germany, Poland and Austria. The key player is Germany, which is home to four out of the group's 10 factories and is set to contribute up to €1.5bn of guarantees.

Following three weeks of intensive talks, a constructive conclusion is in sight, the Opel/Vauxhall chief executive Nick Reilly said yesterday. "Discussions are moving quite quickly and we expect agreement in a small number of weeks," he added.

With so many moving parts, the final details of the package are not yet fixed. "Germany is saying that they understand what we are going to reduce in each plant and what the employee contribution will be, but they need the last pieces of the jigsaw, such as the compensation for employee contributions," Mr Reilly said.

In November, the Berlin government said it was "totally unacceptable" that GM had decided to terminate a deal to sell Opel/Vauxhall to the Canadian auto parts maker Magna, to which it had pledged €4.5bn.

Mr Reilly played down speculation about hold-ups in the German talks. The discussions in Berlin started later than in other countries because of Germany's legal requirement that the restructuring strategy be vetted by independent advisers, he said. "Germany is interested in the fact we've got a viable plan," Mr Reilly said. "But the government already approved significantly more funding for the Magna plan and we think ours is more solid, so I don't personally see any major sticking points."

Opel/Vauxhall is keen to wrap up financing discussions as soon as possible because of the short-term pressures it faces. The combination of the weak automotive market, the group's restructuring costs and the need to keep investing in new technologies such as electric vehicles will be a major drain this year.

"By 2011 we are expecting to be breaking even and by 2012 to be property profitable," Mr Reilly said. "The cash requirements are really this year so if we can get the financing in place in the next couple of months that will take care of these needs."

Alongside upbeat expectations on Opel/Vauxhall's finance talks, Mr Reilly also had crumbs of comfort for staff at Vauxhall's Luton plant. More than 500 UK jobs will be lost during the restructuring, most of them at the Bedfordshire factory, which makes Vivaro vans in a joint venture with Renault. Mr Reilly said he was confident that discussions with Renault about Luton's future, after the current contract runs out in 2013, would be concluded within the next two months.

Although unable to confirm whether the talks would safeguard the plant, Mr Reilly said: "We have had a very good alliance with Renault over last 10 years or more and so we'd be happy to continue. They have some requirements and we have some requirements, and that is what we are debating at the moment."

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