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GM Europe CEO Carl-Peter Forster says Opel is in need of capital.

BERLIN, Germany (CNN) — General Motors’ European division announced Friday that its German subsidiary, Opel cars, will become an independent unit of the company.

“Today we have received confirmation that after 80 years owning this company, General Motors is willing to give up some shares in Opel,” said Klaus Franz, a representative of Opel’s labor organization.  Forster said the company is talking to employee representatives about “how we can prevent redundancies and closing plants.”  “No decisions to close plants or cut jobs have been made. We are trying to prevent that,” Forster said. “But we do have cut costs substantially, by about $1.2 billion.”

GM sells more than half its vehicles outside of North America but is facing losses in all of those markets.

Under the restructuring plan, announced by GM Europe on Friday, the company will ask for a more than $4 billion bailout from Germany and the governments of other European countries that have Opel plants, GM Europe CEO Carl-Peter Forster said at a news conference.

“We are in need of capital that we hope to get with the help of the public sector of about 3.3 billion euros,” said Forster, who was speaking at Opel’s main plant in Ruesselsheim, Germany. “With this aid, we believe that we can lead this company to a very profitable future.”

The plan will be presented to the German government Monday, he said. Opel would like to become fully independent of GM, but it will need taxpayer money to stay alive.

The restructuring plan will allow Opel to maintain its own balance sheet and make its own decisions, but GM will keep a stake in the company. In a news release, GM Europe said that “Opel remains an integral and important part of GM’s global operations and will continue as such in the future.”

The news was welcomed by the labor organization for Opel’s employees, who had staged recent demonstrations demanding that GM’s European brands sever their ties with the American parent company — perhaps with governments taking a stake.

Saab, Opel and Vauxhall are all GM brands that employ about 55,000 people across Europe. GM reported a net loss of more than $30 billion for the last year, including a $9.6 billion net loss in the fourth quarter, a period in which its sales plunged and it needed a federal bailout to avoid filing for bankruptcy.
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GM also disclosed that it burned through $6.2 billion in cash during the last three months of the year. The company ended the quarter with cash of $14 billion.

If not for the $4 billion federal loan it received December 31, GM’s cash level would have fallen below the $11 billion to $14 billion in cash the company has said it needs to continue operations.

Saab has not made a profit since 2001

An administrator has been appointed to handle the process. Saab is seeking to create a fully independent business.

GM has said that it wants to sell Saab. There had been concerns about the loss-making carmaker after the Swedish government rejected GM’s call for aid. GM took a 50% stake in Saab in 1989 and gained full ownership ten years later. Any restructuring would need the approval of Saab’s creditors, who meet on 6 April.

Expressions of interest
“Today is the beginning of a new chapter in Saab’s history,” said Jan Ake Jonsson, Saab’s managing director. He also said that several companies had expressed interest in Saab, though he declined to name any.

“Even though we have not been actively searching for new partners, we have had many knocking on our door showing interest in Saab,” he said. He also revealed that creating a separate unit of Saab and German carmaker Opel, also owned by GM, had not been discussed.

Separately, the German government said that it had not received an official application for a state guarantee from carmaker Opel. The government was waiting for a plan from Opel on its future before making any decisions, a government spokesman said.

Government aid
Despite turning down GM’s request for support, a senior Swedish government official has said the government has not ruled out providing loan guarantees to Saab following its restructuring. “It is not the case that we have closed the door to that. That will depend on what the plans look like,” Joran Hagglund, state secretary at the Swedish Industry Ministry, told the Reuters news agency.

Sweden said last year that it would provide up to 25bn Swedish crowns in aid to its auto industry to help it through the economic crisis. Mr Jonsson said Saab expected to be given access to the state funds.

Saab said in a statement that the reorganisation was “the best way to create a truly independent entity that is ready for investment”. In a restructuring plan submitted to the US Treasury this week, GM had said it planned to make Saab an independent business by the start of 2010.

Loss-making
Sales at Saab in 2008 were down 25% on the previous year. The Swedish carmaker has not made a profit since 2001. In 2007

Saab's managing director said this is the beginning of a new chapter

it made an operating loss of 2.19bn Swedish crowns ($248m; £175m), according to regulatory filings.

It estimates its losses in 2008 at around 3bn Swedish crowns and expects a similar loss this year, filings also revealed.

Stephen Pope, chief global strategist at Cantor Fitzgerald, believes GM “oversaw the destruction of the Swedish car company’s soul”. “Just look at the current ‘93′ [model] as an example,” he said. “The ‘93′ is just a Saab body skin placed on top of the Vectra from Opel/Vauxhall.”

Protection from creditors
The reorganisation process is the Swedish equivalent of going into Chapter 11 bankruptcy protection in the US, providing protection from creditors. Saab has plans to launch three new models over the next year and a half. “Reorganisation will give us the time and means that help get these products to market while minimising the liquidity impact of Saab on GM,” Mr Jonsson said.

Saab said funding for the restructured company would need to be secured during the three-month reorganisation process and would be sought from both public and private sources. During that period, the company is not allowed to pay off any debts accumulated before the reorganisation was declared.

Supplier concerns

Saab employs about 4,100 people in Sweden. Thousands more work for suppliers to the company.

Responding to concerns from Saab’s supplier base, GM Europe said it would establish “a viable mechanism for the timely payment of suppliers’ claims towards Saab”.

GM added that it hoped the gesture would encourage suppliers to support Saab’s efforts to reorganise into an independent business.

Union Givebacks, Rising Market Share Are Tied to Rivals’ Bad News; Why Some Shoppers Switch to Ford

Ford Motor Co., which hasn’t taken a dime of government bailout loans, is benefiting from the troubles of its two cross-town competitors in Detroit, General Motors Corp. and Chrysler LLC.

GM and Chrysler are required to seek cost concessions from the United Auto Workers union under the terms of their federal loans. That allowed Ford to open parallel talks with the UAW, which has a history of working out the same conditions at each company.

This week, Ford and the UAW reached an agreement to cut pay for laid-off workers, ease work rules and eliminate wage increases tied to the cost of living — two days before GM and Chrysler reached the same deal.

Ford CEO Alan Mulally, left, and GM CEO Rick Wagoner at the Detroit auto show last month. Ford has been winning more U.S. customers.

At the same time, while GM and Chrysler have been hit with a steady stream of negative news — including growing concern they may need to file for bankruptcy protection — Ford has been having more success at luring away its competitors’ customers.

Ford’s share of the U.S. retail market rose in each of the past four months, while GM’s and Chrysler’s fell, Ford said.

In January, 45% of Ford buyers turned in cars or trucks of other manufacturers, up from 38% in August, according to Edmunds.com, an auto-shopping Web site. Meantime, the “conquest rate” for GM’s Chevrolet was 43% last month, down from 49% in August, and for the Chrysler brand, the conquest rate was 60% last month, down from 67% in August, according to Edmunds.

“That’s a sign that there is something definitely going on for Ford,” said Jesse Toprak, an analyst at Edmunds Inc.

For some domestic-car buyers, the bankruptcy talk has been enough to cause them to defect to Ford. John Grassi of Warren, Mich., recently turned in his leased Dodge Grand Caravan minivan and replaced it with a Ford Fusion.

“The future of GM and Chrysler certainly played a part in my decision,” said Mr. Grassi, 50 years old, who works for Warren’s parks and recreation department. “Ford seems to be the most sound in terms of staying solvent. I mean, you look at your warranty and you want that warranty to be good.”

Still, Ford has many challenges. Edmunds’s Mr. Toprak said the company is “weighed down” by the perception of many consumers that it is in the same boat as GM and Chrysler. All auto makers are suffering from the recession and credit crunch, which have sent sales plummeting. In January, Ford’s sales were down 40%. And the company continues to post huge losses, including $5.5 billion in the fourth quarter, which are eating up its cash.

Ford isn’t assuming its trend of recent market share increases will continue. “This market provides limited opportunities. You can’t will yourself to higher sales,” said Ford sales analyst George Pipas.

The terms of the government loans also require GM, Chrysler and the union to work out a way for the companies to put less cash and more stock into trust funds to cover the cost of health care for retired union workers. That has opened the door for similar talks at Ford, although no agreements have been reached yet.

Ford also is believed to be seeking concessions from its bondholders and dealers, also required by the loans given to GM and Chrysler. Ford has been less forthcoming about the state of these negotiations. But Ford Chief Executive Alan Mulally said during an earnings call last month that “I really believe from the ongoing conversations that we are having with all the stakeholders and the U.S. government that as we go through this and we continue to take the actions that we need to take that we will not be disadvantaged.”

Meanwhile, Ford seems to have made headway with customers as both GM and Chrysler nearly ran out of money over the past few months. In Centerline, Mich., Bob Thibodeau said he’s noticed more owners of other makes shopping at his Ford dealership. “We have certainly seen a lot more cross-shopping in recent months like we’ve never seen before,” he said.

Ford also may be seeing more customer traffic because it just launched a redesigned version of its F-150 pickup truck, the top-selling vehicle in the country, and its finance arm is healthier than the lenders GM and Chrysler work with, GMAC LLC and Chrysler Financial.

LANSING, Michigan (CNN) — Sherrill Freeborough has a disarming smile, an optimistic spirit and an uncertain future. She owns two Saturn dealerships in the Lansing area, but will lose her partnership with General Motors in three years because the automaker is discontinuing the Saturn and Pontiac brands as part of its restructuring plan.

“I am a small business owner,” Freeborough told us during a visit to one of her showrooms. “Everything I have I have put into the dealerships, my home — everything is in the company. … My husband still can’t breathe. He still asks ‘what are we doing? I thought you were just going to sell cars.’

“So, yeah, everything in my life,” Freeborough said. “I can’t have a bad day and go home and tell him. I have to be happy when I go home because everything we have is wrapped up in this company.”

Across town, Mike Huerta is another stakeholder in the debate over General Motors’ future. The unionized autoworker will be out of a job in the next few weeks.

The Delta Township assembly plant where Huerta works once had three shifts; it is now down to one. Across town at the Lansing Grand River assembly line, work is down from two shifts to one. Plus, workers expect more layoffs to come as GM promises to eliminate 47,000 jobs worldwide in 2009 as part of the restructuring plan it submitted to Congress in hopes of getting another $16 billion in federal bailout loans.

Huerta says that bailout is his best hope of someday getting called back to work at GM, and he bristles when asked about those in Congress who question whether GM management deserves the money, or whether it is the appropriate role of the federal government to step in to rescue a private company.

“It’s scary to see United States senators beholden to foreign interests,” Huerta said. “We had some senators from down South in particular with a lot of Nissan and Honda and Toyota plants basically come up and say that we should go bankrupt. They are not talking about somebody that you can’t see. That means me. That takes away my family’s livelihood.”

Huerta, who has a two-year-old, said he has sharply cut back expenses since receiving his layoff notice. He said he’s not eating out or going to the movie theater. He’s also packing lunches for work. He even decided not to exchange Christmas gifts with his wife this past year.

Huerta is attending Lansing Community College in case GM doesn’t call him back, “to get a little leg up” if he is forced into a horrible local job market.

Freeborough said she is waiting for critical answers from GM and fellow Saturn dealers who are determined to find a new product line to sell once GM ends their relationship. Those cars could be from India or China, and Freeborough concedes that could pose a sales challenge in a town defined by its long American auto industry heritage.

Freeborough said her customer base now remains loyal because of superior service. “A car is a car,” she said. “As a small business owner, I feel really strongly about doing business.”

Freeborough’s service, along with her clients and used car sales, are keeping the business afloat this year as the punishing recession makes families unable or unwilling to make a major investment in a new car.

“I don’t think anyone knows,” Freeborough answers when asked when she believes the economy will take a turn for the better. But she vows her businesses will not collapse after the relationship with GM ends.
“People who don’t succeed are the ones who give up,” she said. “I am not giving up.”