General Motors may need “more drastic” government intervention to save its European operations should efforts to secure help from a third-party investor fail, a person familiar with the situation has said.
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The auto maker warned on Thursday in a regulatory filing that its European restructuring may not be complete until mid-year and that the company is developing “contingency plans” in case negotiations with investors and the German government fail, Dow Jones reported.
GM’s preferred course in Europe is to get government loan guarantees that would entice a third party to invest in the company’s money-losing Opel/Vauxhall operations.
The alternative of direct government support from European nations or the European Union would likely involve strict rules, as has been the case in the US where GM is surviving on US$13.4bn in federal loans.
In Europe, GM is seeking US$4bn in negotiations being led by the German government.
Talks in Germany are proving more difficult than anticipated amid political opposition to government aid for GM and heightened uncertainty after the White House this week rejected the company’s survival plan and gave it until June 1 to restructure or file for bankruptcy.
The person familiar with the plans told Dow Jones the automaker believes a deal remains ‘doable’ by the end of the second quarter, when GM has said it could run out of cash. A backup plan, however, is critical since insolvency in Europe could lead to a collapse throughout GM’s global operations.
GM, in a report to the US treasury’s automotive task force, also said it expects no financial support from the Swedish government unless it can find a suitable investor for Saab. GM is looking to offload the brand and is seeking court protection from creditors similar to a US-style bankruptcy.
GM also said it is talking to the Export-Import Bank of Thailand about securing loans for operations there.
