GM Units In Europe, Korea, Appeal For Aid To Stay Open
21 February 2009 - 3:16AM
Dow Jones News
The severity of the fallout from General Motors Corp. (GM)
financial difficulties became clear Friday as its Swedish received
credit protection from a court and the Korean car maker GM controls
confirmed it has asked a government bank for emergency aid.
Meanwhile, GM's profitable German unit Opel also said that
market conditions have deteriorated and that it needs at least 3.3
billion euros in fresh capital to survive.
The European and Korean manufacturers' troubles underscore the
severity of the crisis in the U.S. auto industry and its ripple
effect. GM, struggling with a $29 billion debt load, is in talks
with German, U.K., Swedish, Canadian and Thai governments to secure
$6 billion in aid and has said planned expansion in Asia won't
proceed without support from governments or other partners.
GM has already received $13.4 billion in loans from the U.S.
government and this week unveiled a restructuring plan saying that
it needed a total of $30 billion in aid, or $16.6 billion more than
it has now. But it's not alone among car makers asking foreign
governments to help their units survive the global economic
turndown that has sliced car makers' sales and battered share
prices world wide. Volvo Cars, a unit of Ford Motor Co. (F), at the
end of January applied to the European Investment Bank, backed by
Sweden, for EUR475 million, for example.
GM's Swedish car maker Saab Automobile AB received credit
protection from the court, allowing it to start its reorganization.
The company's CEO said it hoped the court process over three months
will transform it into a functioning company that is fully
independent from its struggling Detroit-based owner.
"We are now recreating Saab Automobile as an independent unit,"
Saab Chief Executive Jan-Ake Jonsson said in a statement after the
Vanersborg District Court in southwestern Sweden approved its
request to launch reorganization.
But Sweden's government maintained an arms-length approach,
saying it doesn't plan any support for Saab, though it didn't rule
out the possibility of guaranteeing loans that Saab has sought from
the European Investment Bank.
"[Let's picture] Saab as an independent car company with ... low
sales volumes," said state secretary Joran Hagglund at the Swedish
Ministry of Enterprise, Energy and Communication. "If you listen to
analysts, then they say there's not a chance such a company can
survive. So what I'm really saying is that you should keep your
expectations very low."
Saab last year sold fewer than 94,000 cars, down from about
125,000 vehicles in 2007. Its best-ever year was in 2006, when it
sold 133,000 cars, making it a tiny player in the global auto
industry. Saab will present its reorganization plan to creditors
within three weeks, it said.
In Germany, Armin Schild, a supervisory board member at Opel,
told Dow Jones Newswires Friday that the company needs at least
EUR3.3 billion in capital to survive and become less dependent on
GM. The company also asked for state aid in November. GM's largest
European brand didn't provide financial details.
"It's the clear responsibility of Opel's management to paint a
realistic picture and consider the change on European markets when
asking for guarantees from the state," Opel said in a
statement.
Opel's predicament was mirrored in Korea, as GM Daewoo Auto
& Technology Co. confirmed that it has asked for emergency
funding from state-run Korea Development Bank to help relieve its
liquidity crunch. GM and GM's affiliated companies own a 72% stake
in GM Daewoo, while KDB has the remaining 28%.
GM Daewoo has already reached its credit limit of 1.3 trillion
won (US$865 million) from KDB and commercial banks and has KRW125
billion in loans coming due in October, a KDB official told Dow
Jones Newswires, and the company confirmed. GM Daewoo owes KDB
KRW1.055 trillion.
GM Daewoo confirmed the request and said it will submit formal
documents for financial help from state-run banks, without giving
the date.
"We are in discussions with the Korean government and KDB to
secure credit lines during the current global credit market
liquidity shortage in order to fund new product development plans
and new plant investment projects," GM Daewoo said.
Company Web site: www.saab.com, www.gm.com, www.volvocars.com www.gmdaewoo.co.kr
-By Ola Kinnander, Dow Jones Newswires; +46-8-5451-3097; ola.kinnander@dowjones.com
(Kyong-Ae Choi in Seoul and Roman Kessler in Frankfurt
contributed to this report.)