February 17, 2009 / 9:15 AM / 11 years ago

SCENARIOS: GM's European brands brace for survival plan

FRANKFURT (Reuters) - General Motors Corp is to present a survival plan to the U.S. government on Tuesday, showing officials how it plans to cut costs and pay back billions of dollars of bailout loans.

The U.S. carmaker’s plan may include wide-ranging changes in its European operations, which include the German Opel and British Vauxhall brands plus Sweden’s Saab.

Here are some potential scenarios:

GET GOVERNMENT LOAN GUARANTEES AND STATE AID

GM Europe President Carl-Peter Forster is looking for up to $1 billion for support from Stockholm and for less than 2 billion euros ($2.56 billion) in German guarantees for Opel for 2009 and 2010.

Sweden has said it may grant up to 25 billion Swedish crowns ($2.93 billion) in credit guarantees and emergency loans to the industry, including Saab, as long as the money is spent in Sweden to preserve jobs and achieve profitability.

Swedish broadcaster SVT this weekend cited sources as saying GM and Sweden had been unable to agree terms of loan guarantees, though Industry Ministry state secretary Joran Hagglund told Reuters on Monday that talks were continuing.

Berlin is open to aid as long as it is ring-fenced.

Administrators in Europe could check that any monies from a loan guarantee fund are directed to specific projects that ensure no taxpayer money finds its way to Detroit.

Alternatively, states could infuse Opel and Saab with fresh equity. So far Stockholm has made clear it wants to sell state assets, not buy them.

German officials have not ruled out taking a direct stake in Opel as a last-ditch measure to save jobs. GM Europe labor leader Klaus Franz says he does not want Berlin running Opel.

CARVE OUT OPEL AND SAAB

The Swedish government demanded the carve-out of Saab as an independent entity before it would grant any aid, a step that Berlin might also require for Opel as insurance that state aid was not siphoned off to Detroit.

GM Europe labor leaders favor this approach to guarantee the long-term viability of the businesses and avoid plant closures.

SELL SAAB

GM Europe’s Forster said last month an investor had approached GM but that talks would not conclude before the end of March.

Sweden’s Hagglund has said Stockholm has no “political or ideological” preference for a new owner as long as it knows the manufacturing sector and committed to Saab and Volvo.

DISENTANGLE OPERATIONS

Any disposal and deconsolidation of Opel or Saab would likely require business contracts between the two and with parent GM to be renegotiated at arm’s length since all engines and transmissions are sourced separately via GM Powertrain.

The German labor force has long lobbied for Opel cars to be sold in the U.S. market. One industry proposal has been to let Saturn dealers exchange their franchise for an Opel one, giving GM’s second-largest brand a global sales network.

SHUT DOWN SAAB

Although a sale is the preferred solution, “all options are being examined” including a complete closure, a source at GM has acknowledged.

This could be expensive since GM employs roughly 4,400 workers at Saab whose products sell in more than 60 countries worldwide. The European Cadillac model, dubbed the BLS, is manufactured in the Swedish plant in Trollhattan in addition to the Saab 9-3 and the Saab 9-5 models.

Additional reporting by Victoria Klesty in Stockholm and Angelika Grueber in Frankfurt; editing by John Stonestreet

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