Since Germany has denied the request of General Motors Co. for state aid for its Opel/Vauxhall unit, the carmaker has now turned to the four German states that host Opel plants to provide the funds.
For the rest of the year, Opel will remain liquid. However, it has to finance a reorganization plan that will cost billions of euros to cut jobs and capacity by about 20%.
This money will also be used to invest in new products in order to make the company profitable once again. Since Germany has rejected GM request, Opel will have to find another access to loan guarantees.
Opel has submitted an application for 1.1 billion euros in federal guarantees from government bailout money, dubbed the Deutschlandfonds, to backstop private-sector loans offered by Deutsche Bankand Barclays. The four German states that Opel will seek guarantees from include Hesse, North Rhine-Westphalia, Thueringia and Rhineland-Palatinate.
These states have signified their readiness to contribute. For instance, Hesse has a 1.5 billion euro guarantee program for 2010 that Opel could utilize.
Last year, Hesse lent 347 million euros to Opel as part of an emergency bridge loan.
This amount had been repaid with interest. Opel CEO Nick Reilly asserted that the four would be agreeable to extending loan guarantees for 275-550 million euros of the borrowing risks.
Opel could then use these to access funds from the European Investment Bank (EIB). German Chancellor Angela Merkel has suggested Opel could benefit from other German federal programs meant to support energy efficient technology. However, she declined to give details. [via autonews - sub. required]