General Motors signals improving financial situation with bigger investments

Tuesday's announcement by General Motors of more than a billion dollars in increased investment in its European operations could be a signal that the worst is over for U.S. automakers in the global economic slowdown. GM said it would pump the additional money into its ailing Opel operation in Germany and its Vauxhall subsidiary in Great Britain, according to the New York Times. The added investment more than triples the automaker's previously announced investment in the European brands, and appears designed to leverage promised subsidies from European governments. GM has asked for $2 billion in loan guarantees in addition to a $2.7 billion package of subsidies from Britain, France, Spain and other countries with Opel factories, the Times said. Those governments and unions in Europe had demanded that GM pay for 50 percent of the cost of restructuring its operations, the Times said. The United States government has paid billions of dollars to rescue General Motors, once the world's largest automaker and still the largest in the United States, and will own half of the legendary U.S. automaker when it emerges from bankruptcy reorganization. GM released a statement calling the increased investment “a vote of confidence in Opel/Vauxhall’s long-term business strength.” But the head of Opel/Vauxhall's European works council, Klaus Franz, said the new money meets the demands of the countries and unions in Europe. "They saw we were running out of cash and running out of time," Franz said. "I think they saw that there was no alternative if they wanted to get aid from European governments." British business minister Ian Lucas and Kurt Beck, premier of the German state of Rhineland-Palatinate, welcomed GM's announcement. "After a long period of uncertainty, it's high time to offer the Opel factories and employees reliable prospects for the future," Lucas and Beck said in a joint statement. GM's increased investment actually was signaled Monday by Nick Reilly, the president of GM Europe, who said in Geneva that GM believed it could not continue to be a global automaker without a major presence in Europe. Reilly said that was the explanation for GM's decision in November to back out of a deal to sell a majority of Opel to Magna International, a Canadian-Austrian auto parts company, and a Russian partner. Opel still plans to close a factory in Belgium and to cut 8,300 jobs in Europe, the Times said.

Saab closure could be the result of poor GM management

From New York comes word that embattled General Motors has decided to shut down Swedish automaker Saab, the iconic 3,400-employee company it bought 20 years ago. GM has been trying for months to sell off the brand as part of its bankruptcy filing but was unable to reach deals with at least two suitors, according to Cable News Network (CNN). A long anticipated arrangement with Swedish exotic carmaker Koenigsegg fell through earlier this year and a last-minute deal with Dutch automaker Spyker couldn't be concluded in time to save the brand. "Despite the best efforts of all involved, it has become very clear that the due diligence required to complete this complex transaction could not be executed in a reasonable time," said Nick Reilly, president of GM Europe, CNN reported. "In order to maintain operations, Saab needed a quick resolution. We regret that we were not able to complete this transaction with Spyker Cars." The Koenigsegg deal's collapse followed a similar pattern, with last-minute complications also scuttling that arrangement. "In the end, Koenigsegg discovered some issues they didn't think could be overcome in a timely fashion," said John Smith, GM's vice president of corporate planning and alliances. "Like everybody, we would have preferred a different outcome." Well, that's what they say and, maybe in today's worldwide credit starved business environment, that's exactly what happened. But in light of the September failure of a deal to sell GM's Saturn subsidiary, and GM's decision to shut down its Pontiac brand, there may be another dynamic at work. If the Pontiac, Saturn and Saab brands were in good shape, any carmaker -- except, perhaps, for the other bankrupt U.S. company, Chrysler -- should have been happy to own them. At the price GM should have been willing to part with them -- the largest U.S. automaker is a highly motivated seller, remember -- there shouldn't have been any reason for all three deals to fall through in such a similar manner. GM's deal to sell its Hummer brand to Sichuan Tengzhong, a Chinese heavy equipment maker, is still awaiting government approvals, CNN said.