F&C UK High (LSE:FHI)
Historical Stock Chart

From May 2019 to May 2024

General Motors Corp. (GM) may need "more drastic" government intervention to save its European operations should efforts to secure help from a third-party investor fail, a person familiar with the situation said.

The auto maker warned Thursday in a regulatory filing that its European restructuring may not be complete until mid-year and that the company is developing "contingency plans" in case negotiations with investors and the German government fail.

GM's preferred course in Europe is to get government loan guarantees that would entice a third party to invest in the company's money-losing Opel/Vauxhall operations.

The alternative of direct government support from European nations or the European Union would likely involve strict stipulations, as has been the case in the U.S. where GM is surviving on $13.4 billion in federal loans.

In Europe, GM is seeking $4 billion in negotiations being led by the German government.

Talks in Germany are proving more difficult than anticipated amid political opposition to government aid for GM and heightened uncertainty after the White House this week rejected the company's survival plan and gave it until June 1 to restructure or file for bankruptcy.

The company believes a deal remains doable by the end of the second quarter, when GM has said it could run out of cash, the person familiar with the plans said. A backup plan, however, is critical since insolvency in Europe could lead to a collapse throughout the auto maker's global operations.

GM, in updates that came as part of a submission on Monday to President Barack Obama's automotive task force, also said it expects no financial support from the Swedish government unless it can find a suitable investor for its Swedish Saab (SAAB-B.SK) brand. GM is looking to offload the brand and is seeking court protection from creditors similar to a U.S.-style bankruptcy.

GM said it also is talking to the Export-Import Bank of Thailand about securing loans for operations there.

GM promised an overhaul of its money-losing European conditions as part of a plea last month for up to $30 billion in U.S. government loans.

The auto maker is seeking billions in aid from other regions as it scrambles to avoid bankruptcy. The White House this week gave GM 60 days to restructure its operations and balance sheet. If those efforts fail, the company would be forced into a government-funded bankruptcy reorganization.

-By Sharon Terlep; 248-204-5532; sharon.terlep@dowjones.com.