$5bn lifeline for Vauxhall owner GM
The American owner of Vauxhall Motors looks set to win a $5bn slice of US state aid that could help it to restructure the business without falling into bankruptcy.
Lifeline: Vauxhall workers in the UK may be spared.
General Motors has been teetering on the brink since President Barack Obama's administration gave the Detroit giant just 60 days to come up with a radical plan to cut debt, slash the workforce and streamline its portfolio.
The group's struggle for survival is being closely monitored by more than 5,000 workers at Vauxhall's two UK plants at Ellesmere Port in Merseyside, and Luton.
It emerged this week that GM is planning to virtually give away its European arm, which includes Vauxhall and Opel.
It is in talks with six potential investors - four financial speculators and two trade suitors - who would have to pay at least £440m for a majority stake in the European business.
Professor Garel Rhys, car industry expert at Cardiff University, said: 'It's better that the (European) business is sold for the longer term, and not just for asset stripping.'
GM has until June 1 to come up with a viable business model if it is to win further state handouts. It is currently surviving on $13bn of taxpayer support.
A federal report yesterday said the US government will loan GM up to $5bn more to make it through to the June deadline. Rival Chrysler, which is in rescue talks with Italy's Fiat, could also get up to $500m more.
The report said the money will be made available for working capital as both companies try to meet government restructuring demands.
If GM fails to take radical steps, it could be plunged into Chapter 11 bankruptcy protection that would force it to split into a 'good GM' with the profitable assets, and a 'bad GM' comprising loss-making brands, factories, and debts.
The healthy business would be sold, and the toxic rump would be liquidated over a number of years.
GM this week axed 1,600 fulltime employees in the US as it scrambles to reduce overheads. The cuts are part of GM's plan to slash its global salaried work force this year by about 10,000, or 14%.
The Detroit giant has been hit by a collapse in sales, as the economy has hit reverse gear.
US auto sales tumbled 38% to the lowest level in nearly three decades in the first three months of 2009. GM's US sales fell 49% in the same period.
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