Q+A-Why is Opel still asking for German state aid?

FRANKFURT, May 25 (BestGrowthStock) – Germany’s state rescue fund is
keeping Opel waiting for details of any state guarantees it will
make available to the German carmaker. [ID:nLDE64O0J4]

Following are some questions and answers about Opel, the
European arm of General Motors [GM.UL]:

HOW MUCH AID OR SUPPORT DOES OPEL NEED?

German Chancellor Angela Merkel originally pledged 4.5
billion euros of state guarantees as part of an earlier plan to
sell Opel to auto parts supplier Magna and Russia’s Sberbank.
This lapsed when GM abruptly changed its mind last year and
deciding to retain Opel.

Opel’s current business plan foresees a funding requirement
of 3.7 billion euros through 2014, roughly 1 billion of which is
needed to reduce production and labour capacity by 20 percent.

Parent GM had originally viewed its funding responsibility
as complete, after paying 600 million euros last November but
this money was used to redeem a German bridging loan and return
100 percent control of Opel to Detroit.

GM agreed in early March to triple this to 1.9 billion euros
in loans and even equity if needed, after Germany indicated it
wanted GM to provide at least half of the funding for Opel.

Germany’s state rescue fund can provide a guarantee for 90
percent of some 1.3 billion euros in loans to be provided by a
bank consortium led by Deutsche Bank (DBKGn.DE: ).

The remainder would come from Britain, Spain and Poland as
well as other countries where Opel also operates plants.

WHY CANT’T IT JUST BORROW THE MONEY?

As a 100 percent subsidiary of GM, the German carmaker says
it does not have access to credit lines, since it has no debt
rating of its own.

The European Investment Bank provided over 8 billion euros
in loans to the European auto sector last year but Opel had no
access to this pot of cash.

WHAT ARE OPEL’S LONGER-TERM PROSPECTS?

Adjusted for restructuring charges and a one-off gain from
the sale of Saab, GM Europe – which effecively represents Opel –
posted an underlying quarterly loss of $324 million this year.

Losses are likely to be higher over the course of 2010
because Opel will book the bulk of its 1 billion euros in
restructuring costs in the second and third quarters.

Excluding the charges, business should gradually improve
thanks to stronger market demand and the relaunch of its Astra
and Meriva models. CEO Nick Reilly is confident that Opel can
break even next year and make a decent profit in 2012.

WILL OPEL COLLAPSE IF BERLIN REFUSES AID?

GM has said it will not let Opel fail and has $21.6 billion
in net cash to fund its global operations. The GM group overall
generated $1 billion in cash in the first quarter alone, which
could be used for Opel without tapping U.S. taxpayer funds.

To read a story on the chances of GM’s Opel receiving state
aid from Germany, please click on [ID:nLDE6490DY]

For an Opel Timeline, click on [ID:nLDE6100TZ]

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(Reporting by Christiaan Hetzner; Editing by David Cowell)

Q+A-Why is Opel still asking for German state aid?