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March 3, 2010

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GM pledges US$2.6b to turn around Opel and Vauxhall

GENERAL Motors Co said yesterday it would more than triple its funding for the turnaround of European units Opel and Vauxhall to 1.9 billion euros (US$2.6 billion).

GM had initially pledged 600 million euros and hoped to get some 2.7 billion euros in European government funding for the restructuring of its important European units, but that had been looking increasingly unlikely in recent weeks.

GM will now be asking European nations for less than 2 billion euros in the form of loan guarantees.

German Economy Minister Rainer Bruederle stressed that a lot of questions regarding GM's plans with Opel remained unanswered.

However, the announced funding increase shows that GM still has money in its coffers, Bruederle added while visiting the annual CeBIT trade fair in Hannover.

The request for state aid is currently being examined. "The outcome remains open," Bruederle said according to German news agency DAPD.

GM abruptly abandoned a plan to sell the majority of Opel and Vauxhall to investors late last year, instead choosing to keep the European brands for itself.

GM said its higher contribution in the form of equity and loans removes the risk of potential liquidity shortfalls during Opel's and Vauxhall's restructuring this year.

"GM's 1.9 billion euro commitment is the right course of action for Opel and Vauxhall and should clearly signal our determination to fix our business," Nick Reilly, the chief executive of Opel and Vauxhall, said in the statement.

"Our call for the additional funding was approved by GM's senior management and supported by the board," he said.


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