Vauxhall and Opel, the European operations of General Motors, have withdrawn applications for government loans citing complications and delays.
It says the 1.8bn euros £1.5bn of aid was still needed, but said that despite months of negotiations, the process has been “much more complex and longer than anticipated”.
Germany has rejected a request for state aid and following the election, the new UK government had put loan guarantees under review.
In March, shortly before the general election, the UK Labour government had agreed to guarantees for £270m of loans. However, the new coalition government put this decision under review as part of efforts to cut spending, leading to uncertainty that the loans would actually be provided.
However, shortly after the GM withdrawal announcement, Business Secretary Vince Cable confirmed to the House of Commons that the UK would go ahead with its pledge to guarantee loans. “We understand that GM is considering its next steps in the light of progress in obtaining funding from Germany,” he said. “I believe it may not wish to proceed with our offer, but the offer has been made.” Labour blamed “foot-dragging” by the Conservative/Lib-Dem coalition for Vauxhall’s decision.
Earlier this month, Germany rejected a request for about 1bn euros of loan guarantees. GM Europe president Nick Reilly said that decision had been “disappointing” and meant the matter may have dragged on for many months.
“We cannot afford to have uncertain funding plans and new time-consuming complex negotiations at this time when we need to keep investing in new products and technologies,” said Nick Reilly.
The company says it needs to restructure as quickly as possible – and says securing support from European governments is taking too long. GM is now to fund their growth plans internally. “GM’s recently improved financial strength has been a catalyst for making this decision,” the carmaker said in a statement. With US sales improving as economic conditions improve, GM is expecting to return to profitability “shortly”.
While a GM Europe spokesperson confirmed that the company would not be taking up the offer of a loan, its UK subsidiary Vauxhall said that despite this there would be no job losses at Ellesmere Port, which employs more than 2,000 people.