GM begins crisis talks

General Motors is in crisis talks with unions and governments throughout Europe after the US Congress rejected a $14bn loan package to support its automotive industry.

General Motors (GM) is in crisis talks with unions and governments throughout Europe after the United States Congress rejected a $14bn (£9.4bn) loan package to support its automotive industry.

In a statement, the world’s largest automaker said that it was ‘very disappointed in this development’, however it would continue to look at options to stabilise the business in the current financial difficulties.

The statement continued: ‘As it pertains to GM Europe, we are working with our labour representatives and the European governments where we have big operations to provide liquidity for sustaining operations, while the US team pursues its options.’

The Spanish state of Aragon, where the GM/Opel plant is located, has agreed to support the plant with credit guarantees of €200m.

The company is also in talks with the German government, where GM brand Opel has production facilities, regarding the continuation of a credit guarantee.

While GM Europe seeks to manage its cost structure and continue key product programmes, the rejection of the $14bn rescue plan leaves GM’s US operations in a critical state.

The car manufacturer claimed that without the federal rescue package it would lack the necessary funding it needs to pay operational costs by the end of this month.

In a proposal submitted to the Senate banking committee, GM said: ‘A failure by GM will likely trigger catastrophic damage to the US economy, precipitating failures among component and logistic suppliers, other domestic car manufacturers, raw material suppliers, technology and service providers, retailers and their suppliers, and GM creditors and financial institutions.’

GM has reportedly hired lawyers to consider whether it should file for bankruptcy protection, while the US administration explores alternative routes to prevent one of its largest companies from folding.