General Motors said it will triple its funding of European arm Opel and cut its request for state aid, in a bid to win over European governments and labor.
The US carmaker's decision to provide €1.9 billion ($2.57 billion) in equity and loans rather than just the planned €600 million means Opel will have enough cash to operate through the year. It had previously said it had enough liquidity to operate well into the second quarter.
"We hope that our strong commitment will be well received as a major milestone in our ongoing discussions about government guarantees to cover the remaining gap," Opel chief executive Nick Reilly said in a statement on Tuesday.
GM last year scrapped plans to sell Opel and asked European governments and workers to contribute to the cost of returning the carmaker to profitability.
But labor representatives have baulked at GM's plans to shut an Opel factory in Belgium and rescinded their promise to contribute €265 million in annual cost concessions.
Germany - where half of Opel's staff work and which was supposed to provide the lion's share of aid - had been cool to the idea of funneling taxpayer funds into Opel.
GM's plan for Opel envisages 8,300 job cuts factories across Europe, shuttering the Antwerp plant, 20% capacity cuts and a return to profit by 2012.
On Monday, Opel labor chief Klaus Franz had demanded that GM invest at least €1 billion to restructure Opel and improve its chances for getting state aid. GM had originally asked European countries with Opel plants - including Germany, Belgium, Britain, Austria, Poland and Spain - to contribute €2.7 billion of aid.
Opel said on Tuesday that the US carmaker has cut its request and is now asking the governments for less than €2 billion. It has also increased the total restructuring budget at the request of the governments.
"An additional €415 million had been requested by the respective European governments to offset the potential impact of adverse market developments," Opel said on Tuesday.
That raises the cost of restructuring Opel to about €3.7 billion, which Opel said would remove any potential liquidity risks this year.
At the same time, GM is now asking governments to contribute less than €2 billion in aid versus the €2.7 billion it previously wanted.
"It is of vital importance for GM to demonstrate our commitment for our European operations," GM chairman and CEO Ed Whitacre said in the statement. (Reuters)