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Auto Industry

GM invests billons in troubled Opel offshoot

General Motors has announced plans to invest 4 billion euros ($5.2 billion) in its struggling Opel and Vauxhall offshoot in Europe. The injection still leaves Opel on an uneven playing field against European rivals.

General Motors Chairman and CEO Dan Akerson pledged the cash injection at Opel's Rüsselsheim headquarters on Wednesday, saying that Opel still enjoyed its parent company's "full support."

"As a global automotive company, GM needs a strong presence in Europe, in terms of design and development as well as manufacturing and sales," Akerson said, singling out the German market as particularly important.

"GM will also continue to fully support Opel's restructuring plan and its goal of making a profit again by the middle of the decade," Akerson said. He was speaking next to the still comparatively new Adam, a compact city car that Opel hopes will lead the line for years to come.

The visiting GM dignitary said the money would allow Opel and its British Vauxhall alter-ego to release 23 new models and 13 new engine and transmission combinations by 2016.

The extra income still pales in comparison to some of the competition in Europe and Germany. Volkswagen is planning to invest around 20 billion euros in new models between now and 2015, 11 billion just at its Lower Saxony hub.

Guarded optimism, outstanding gripes

The state premier of Rüsselshiem's Hesse region, Volker Bouffier, said his government was "not euphoric, but very grateful" about the GM pledge.

Opel's board chairman Steve Girsky said at the conference that the company "is on the way to the biggest turnaround in the history of the European auto industry."

Staff council head Wolfgang Schäfer-Klug welcomed the announcement, saying such "unmistakable support" from Opel's parent company would have been difficult to imagine until recently.

Unlike most German carmakers, which are expanding revenues in emerging markets like China and competing in the United States, General Motors only allows Opel and Vauxhall to vie for sales in Europe - where even the market leaders have been struggling in recent years.

GM actively sought to sell Opel in 2009, only hitting the brakes at the eleventh hour. It is now trying to restructure and streamline the loss-making subsidiary instead; the major Opel factory in Bochum, currently due to close at the end of 2014, is the most visible consequence of the savings drive.

Of the four Opel factories in Germany, only staff in Bochum rejected the terms of the restructuring plans. GM and Opel had offered to retain about a third of the workforce, if they agreed to pay freezes and other conditions.

msh/ccp (AFP, Reuters)