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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.

Troubled U.S. auto makers and union representatives dug in late Monday for all-night cost-cutting negotiations as the government advanced its point person on auto restructuring, a former investment banker with a record for demanding harsh concessions from manufacturers, unions and investors alike.

General Motors Corp. and Chrysler LLC are required to submit recovery plans to the government on Tuesday as part of their agreement to receive billions of dollars in federal loans. As the government’s auto-industry task force began to take shape ahead of the deadline, President Barack Obama’s administration appeared to be turning up the pressure on GM and Chrysler to carry out tough restructuring measures, possibly through the use of the bankruptcy court.

The administration stepped back over the weekend from naming a “car czar,” as it had planned, to oversee the restructuring. But according to people familiar with the task force, it named former Lazard Freres & Co. investment banker Ron Bloom a key adviser. Mr. Bloom, who made a name advising U.S. steelworkers to accept major concessions in several bankruptcy cases, is expected to take the task force’s lead role, a senior U.S. Treasury official says.

People who know Mr. Bloom expect him to be tough on the auto makers, the United Auto Workers and other parties involved in their restructuring.

“The management of the Big Three are probably not going to like what Ron Bloom has to say; the UAW is not going to like what Ron Bloom has to say; and certainly the stockholders and creditors will not like what he has to say,” said Michael Psaros, a co-founder of private-equity group KPS Capital Partners, who has worked with Mr. Bloom in and out of bankruptcy courts. He adds that Mr. Bloom has “repeatedly shown an ability to transform struggling companies into profitable going concerns.”

Under the terms of their federal loans, GM and Chrysler are supposed to submit plans to the Treasury Department on Tuesday to show how they are using taxpayer dollars to become viable. These are supposed to include agreements with the UAW on labor-cost reductions and deals with bondholders and other creditors for reducing their debt. Those talks have bogged down as all sides awaited the naming of a car czar to oversee the process.

On Monday, GM’s bondholder committee delivered a “framework” for a new debt structure, one person close to the committee said. Late Monday afternoon, talks between the UAW and both GM and Chrysler were also making some progress as the parties hammered out cost-reduction details. But people familiar with the talks said significant differences remain between the sides.

The car companies must submit their proposals by 5 p.m. Tuesday to James Lambright, chief investment officer for the Troubled Asset Relief Program.

The government could seek tougher concessions from the auto industry because conditions have worsened since the loans were offered in December. “With the economy in this precarious situation, no one wants to put the automakers into bankruptcy, but can this much restructuring be accomplished without bankruptcy?” said one auto adviser. Ultimately, the government will have to decide how much to subsidize the auto industry, he added. “That’s a critical decision that only the president can make.”

Details of the government’s task force emerged over the weekend but its final composition remains unclear. It will be led jointly by Treasury Secretary Timothy Geithner and Lawrence Summers, who heads the National Economic Council, and will be responsible for managing the $17.4 billion in federal loan agreements between the auto makers and the U.S. government.

Mr. Bloom, 53 years old, was named as an adviser to the Treasury and will report to Messrs. Geithner and Summers. Also named to the task force was Diana Farrell, deputy director of the National Economic Council. Ms. Farrell was formerly a director with McKinsey & Co. She did not respond to requests for comment.

People familiar with the panel say it could also include Steven Rattner, a New York financial executive who was strongly considered for the car czar role.

White House spokesman Robert Gibbs said naming a team brings in “a broader array of people” who have expertise and “can deal with the many challenges” the industry is going to face in the next several months.

GM so far has accepted $13.4 billion in loans and Chrysler $4 billion. GM is expected to tell the government it needs several billion more or it may have to file for bankruptcy protection. Chrysler has said it hopes to get $3 billion in additional loans.

The Obama administration has told GM to address the possibility that it will eventually file for bankruptcy protection, Rep. Sander Levin, a Michigan Democrat, said Monday. “They’ve been asked to address the issue of bankruptcy in their plan but not to have that as an alternative plan,” Mr. Levin said in a phone interview. “That’s my understanding.”

A GM spokesman declined to comment on a bankruptcy plan. People familiar with the matter have said the auto maker has been preparing detailed bankruptcy plans and has softened its previous view that such a filing was not an option for the company.

David Axelrod, a senior adviser to President Obama, declined to rule out government-backed bankruptcy. “We’re going to need a major restructuring of these companies,” he said on NBC’s “Meet the Press.” “How that restructuring comes is something that has to be determined.”

Mr. Bloom, a graduate of Harvard University who spent 10 years at investment banks before joining a team advising the steelworkers union, is seen as one of the chief architects of a consolidation of the steel industry that has involved about 35 bankruptcies over several decades. He’s known as a blunt communicator. The voicemail greeting on his office and cellphone is simply, “Hi, it’s Ron, you know the drill.”

Mr. Bloom did not return several phone calls for comment.

In a 2006 speech, he described his approach to restructuring as “dentist-chair bargaining,” in which the patient “grabs the dentist by the b — and says, ‘Now let’s not hurt each other.’”

Under Mr. Bloom’s guidance, the United Steelworkers gave up pay, job security and benefits in a bid to help the industry recover. In some cases, thousands of steelworker jobs were lost when union leadership agreed to large-scale work-force reductions in restructured companies. In other instances, workers who kept their jobs had to work more years at the new company to become eligible for pension benefits. Mr. Bloom also negotiated benefits for union members and retirees that kicked in once reconfigured steel companies became profitable.

Such creative solutions could also come into play at the automakers. Wilbur Ross, a billionaire investor who worked closely with Mr. Bloom in restructuring the steel industry, credits him with being tough on companies without being destructive. He “probably saved the jobs of 100,000 steelworkers,” Mr. Ross said, while also saying Mr. Bloom “negotiated a totally different contract that simplified work rules” and other union provisions.

Alan Reuther, the UAW’s legislative director, said the union doesn’t believe Mr. Bloom’s appointment increases the chances that auto makers will seek bankruptcy protection. Mr. Reuther lauded the choice of Mr. Bloom, calling him a “very bright, talented person with a lot of experience about restructuring.”

Mr. Bloom is expected to lean heavily on the NEC’s Ms. Farrell, as well as Centerbridge Capital’s Stephen Girsky, a key adviser for United Auto Workers President Ron Gettelfinger.

The Obama administration decided to name a task force after concluding that identifying and recruiting a car czar was a nearly impossible task, say officials and finance executives.

“Whoever did the job would be politically assassinated,” said one administration official. “The car czar became a political hot potato. A smart New York guy wasn’t one of theirs [from the Big Three]. And a Detroit guy wasn’t acceptable to environmental and energy interests. No one person would be politically acceptable.”

A leading contender to be the car czar was Mr. Rattner, a prominent New York Democrat and the founder of private-equity firm Quadrangle. Initially conflict-of-interest questions arose because Quadrangle had borrowed from Chrysler’s majority owner, Cerberus Capital Management LP, an administration official said. That was resolved but Mr. Rattner had concerns about deserting his business for a politically charged assignment, an adviser said.