GM boss: US aid can be used to fix Opel if needed

General Motors Co.'s top executive said Thursday that the automaker could tap some of its $50 billion in U.S. government aid to help restructure GM's European Opel unit. The statement came as thousands of Opel workers walked off their jobs across Germany in protest of GM's decision to abandon the unit's sale to new owners.

CEO Fritz Henderson said GM would use U.S. government money for Opel only if necessary, and it would try to finance the $4.5 billion (3 billion euros) restructuring with loans from European countries, money generated by Opel and by reducing royalties that Opel pays GM for use of technology.

Henderson's statements come two days after GM's board shocked German leaders and labor unions by rejecting a plan to sell 55 percent of Opel to a partnership of Canadian auto parts supplier Magna International Inc. and Russian lender Sperbank.

The move angered German and Russian politicians as well as labor leaders, who had expected the Magna deal to go through. German workers left their jobs en masse, fearing widespread layoffs as GM tries to shrink Opel's manufacturing operations to match demand for its vehicles.

Russian Prime Minister Vladimir Putin asserted that GM had exhibited an "arrogant attitude" in abandoning months of negotiations. German Foreign Minister Guido Westerwelle, visiting Washington, said that "jobs must be protected."

Workers at Opel's headquarters in Ruesselsheim vented their anger at a rally. One group carried a black coffin with the GM and Opel logos; others held placards such as "GM get lost" and "Hands off Opel."

At GM's headquarters in Detroit Thursday, Henderson told reporters the company has a lot of work ahead in repairing its relations with German labor.

Unions and employees had offered cost-cutting concessions to ease a Magna deal, such as forgoing pay increases, but those offers are now off the table.

GM will face a new battle to secure concessions for its own restructuring plan - and has raised the prospect of a bankruptcy if it is blocked.

"Stop the talk about insolvency - that is damaging to the business," said Klaus Franz, the head of Opel's employee council.

Henderson said GM is forming a transition team to lead the restructuring, and soon it will present a plan to governments in Germany, Spain, Great Britain and Poland, as well as labor leaders.

GM has said the number of layoffs would be about the same as outlined in the Magna plan - about 10,500, or 20 percent of Opel's work force. Henderson would not comment when asked about what factories would be closed.

The Detroit automaker is focused on getting financing to fix the money-losing Opel, which for years has had factory capacity that is far higher than its sales. Just how much of the money would come from European governments and how much from GM will have to be negotiated.

German workers worry GM will make deeper cuts to return Opel to profit than Magna would have. Yet the decision by GM's board to keep Opel won a cautious welcome from union officials in Britain and Poland, where workers had feared cuts in a Magna takeover.

"Our trust (in GM) is now zero, and that is the heart of the problem," Franz told workers at the Ruesselsheim rally.

Franz urged GM to come up with a viable plan for Adam Opel GmbH. He argued that Opel should have a more independent status and "no longer be an appendage of GM."

Organizers estimated that 10,000 workers attended the Ruesselsheim rally, while police put the figure at 6,000. Smaller rallies were held at factories in Bochum, Eisenach and Kaiserslautern.

German Chancellor Angela Merkel's office said she had discussed it with President Barack Obama, who told her he had no involvement in Tuesday's GM board decision.

GM's decision was an embarrassment to Merkel, coming hours after she had addressed the U.S. Congress. German officials swiftly demanded a restructuring plan from Detroit and vowed to recover by Nov. 30 a 1.5 billion euro ($2.2 billion) bridge loan granted to keep Opel afloat as a buyer was sought. Henderson said Opel would repay the loan.

GM could be forced to fund the bulk of Opel's restructuring itself, through royalty cost reductions or even direct aid from U.S. operations, but it is hoping to get most of the money from governments.

Henderson said GM's first loan agreement with the U.S. government last December prohibited spending outside the U.S. However, aid granted in August after GM left bankruptcy protection allows spending in other countries, he said.

"We certainly need to be prudent about it, be very careful about it, but we do have the ability to run a global business," he said.

He said Opel's cash situation has improved with a recovering European auto market.

GM also would have helped support the Magna deal through royalty payment reductions, said John Smith, the company's chief negotiator in the Opel restructuring.

He said in an interview Thursday that GM has a greater chance of success in restructuring Opel than Magna because of its knowledge of the business and because it won't have to get other investors to agree with decisions.

"We will be better able to implement this plan," he said.

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Associated Press Writer Nataliya Vasilyeva in Moscow contributed to this report. Guido Rijkhoek reported from Ruesselsheim, Germany.