GM to split from Opel

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GM will keep a stake in Opel, but the German subsidiary will become a separate company.

Berlin, (CNN) -- General Motors' European division announced Friday that its German subsidiary, Opel cars, will become a separate company. GM will keep a stake in the new company.

Opel is asking for a more than $4 billion bailout from the governments of Germany and the other European countries that have Opel plants, GM Europe's 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 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.

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."

He also said that the new Opel company wants GM to remain a shareholder in the new company in order to have access to parts and new technological developments that can only be achieved in large companies.

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

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.

GM (GM, Fortune 500) 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 on Dec. 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.
http://money.cnn.com/2009/02/27/news...ion=2009022711