GM aims to cut capacity at Opel and Vauxhall by 20%

GENERAL MOTORS plans to cut capacity by between 20 per cent and 25 per cent and the headcount by 9,000 to 10,000 at Opel and Vauxhall, but denies it will engage in a "bidding war" over jobs with European governments, from which it is seeking aid.

Nick Reilly, Opel's acting chief executive and head of GM's international operations, said yesterday the US carmaker hoped to have agreement in principle on loans or guarantees from governments where it has plants within three weeks, and a restructuring plan implemented by the end of this year.

GM is seeking €3.3 billion to restructure Opel and invest in new products. It says it is willing to provide some of the money itself, depending on the outcome of its talks on aid.

Mr Reilly made the remarks after talks yesterday on potential loans or guarantees with British business secretary Peter Mandelson and on its restructuring plans with trade union Unite.

This week, Mr Reilly held similar talks in Belgium and Poland, where GM also has plants, and will now visit Spain. "There is not a specific bidding war among countries where we say: 'If you give us this much, we will give you this much capacity'," he said.

But he said that "if a country refuses to participate at all, then of course it could influence plans somewhat".

He said this was a "hypothetical situation" and that Lord Mandelson had said he would "do what he could".

GM is not commenting on where it plans to make job and capacity reductions - the subject of controversy during Magna International's failed bid for Opel and a warning from the EU on illegal state aid - until it has finished consultations with unions and governments.

Mr Reilly said GM saw a "good future" for both UK plants, though he would not rule out "a plant" closure elsewhere in Europe. GM might scale back 800 job cuts mooted by Magna at its larger plant in Ellesmere Port "quite significantly".

The 20 to 25 per cent capacity cut GM is planning across Europe is smaller than a gloomier projection made earlier this year, when the Detroit-based carmaker said it had overcapacity equivalent to three of its eight car plants on the Continent.

At Luton, GM is in discussions with Renault, which makes commercial vehicles in a joint-venture contract due to expire in 2013, on potential future plans.

If Renault pulled out, Mr Reilly said, GM would strive to "do something else" at the plant. GM's European arm lost about $400 million (€452 million) in the third quarter.

Mr Reilly said Opel had about $2.5 billion of liquidity on hand, enough to last "well into the first quarter of next year".

GM would repay €400 million of an outstanding German government bridge loan not from Opel/Vauxhall but from its own funds. - (Copyright The Financial Times Limited 2009)