GM’s Opel May Be Next ‘Domino’ After Saab Without a Rescue Plan

By Andreas Cremer and Chris Reiter

Feb. 21 (Bloomberg) -- General Motors Corp.’s decision to push its Saab unit into bankruptcy protection puts pressure on Germany, the U.K. and Spain to come up with funding that the U.S. company says is needed to save the rest of its European business.

Saab filed for creditor protection yesterday after GM said it would cut ties with the Swedish carmaker following two decades of losses. Hours later, Opel supervisory-board member Armin Schild said the Ruesselsheim, Germany-based unit needs a rescue package that may exceed 3.3 billion euros ($4.23 billion).

“The Saab filing creates fear of a domino effect,” said Ferdinand Dudenhoeffer, director of automotive research at the University of Duisburg-Essen. “It increases pressure on Opel because GM has shown it cannot absorb its units’ debts.”

Opel employs 50,000 people across Europe, more than 10 times the number at Saab. About half the workforce is in Germany, where Finance Minister Peer Steinbrueck said yesterday he’s opposed to taking a stake in order to save the division. GM says it needs $6 billion from foreign governments and must reach an agreement to shave $1.2 billion from European labor costs by March 31.

Detroit-based GM said Jan. 11 that, in addition to talks with Germany, it’s also in touch with governments in Spain, where it employs more than 7,200 people, and the U.K., headquarters to Opel’s Vauxhall brand, with a workforce of almost 5,000.

March 31 Deadline

GM has set March 31 for deciding on all its European divisions’ future as the carmaker seeks as much as $16.6 billion in new U.S. federal loans. The U.S. company will end financial support for Saab by Jan. 1. Opel division and Luton, England- based Vauxhall are integral to operations, GM has said.

Opel plants in Bochum and Eisenach, Germany, face the greatest threat, together with another in Antwerp, Belgium, where the division employs another 3,700 people, a person familiar with the situation told Bloomberg this past week.

Saab’s move to seek protection from creditors “creates a sense of urgency” at Opel, said Laurenz Meyer, a lawmaker an economics spokesman with Chancellor Angela Merkel’s ruling Christian Democrats.

GM must specify its plans for Opel before Germany can tailor a rescue package, said Birgit Diezel, finance minister for the state of Thuringia, where Eisenach is located. Germany’s federal government and four states where Opel has factories are looking at options including loan guarantees, direct investment and the recruitment of foreign partners to support the unit, she said.

‘Dramatic’ Situation

“We’re in concrete negotiations with all parties involved,” said Diezel, also a Christian Democrat, adding that Thuringia “will use all options” to secure the future of the Eisenach factory and its 1,900 workers.

“The Saab filing very clearly shows how dramatic the situation is,” said Christoph Stuermer, an analyst at IHS Global Insight research company in Frankfurt.

Opel may also lose out because it had planned to build the new Saab 9-5 sedan, Stuermer said. Still, should Trollhaettan- based Saab survive a three-month “reconstruction” under court supervision, the Swedish company may play a role in a more independent Opel, he said. As GM’s only European brand with market recognition in the U.S., Saab could offer Opel a chance to “re-skin” its products for the world’s biggest auto market.

The Swedish government, too, is keeping GM at arms length, reiterating yesterday that it doesn’t plan to risk taxpayers’ money on Saab. Prime Minister Fredrik Reinfeldt said Feb. 18 the U.S. company’s demands amounted to a “trap” set to pressure the government into granting aid.

To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net; Chris Reiter in Berlin at creiter2@bloomberg.net