Moody's To GM: What Have You Been Smoking?

Bertel Schmitt
by Bertel Schmitt

After GM announced that they would keep Opel after all, they boasted that “the GM plan entails total restructuring expenses of about €3 billion, significantly lower than all bids submitted as part of the investor solicitation.” After hearing the statement, industry insiders snickered that €3B would be “hardly realistic.”

Now, credit rating agency Moody’s confirms that GM either made that number up, or they lied. Not even close, says Moody’s.

Moody’s says the total funding requirement for Opel is $8.5 billion (or €5.8B), Reuters reports. That’s about double of what GM said they would need.

“The question remains, how will GM fund Opel? We do not think that the company’s liquidity position — including the resources available from the U.S. Treasury — are sufficient,” Moody’s writes.

From Germany, GM won’t get a cent. Germany’s new Economics Minister, Rainer Brüderle, said on Sunday that GM does not satisfy the criteria for aid. For good measure, Brüderle repeated the statement on Monday, as Fritz Henderson arrived in Rüsselsheim for talks. Henderson is not invited to see Brüderle. What Brüderle wants to see is that Opel or GM pays back the balance of the bridge loan by end of November, plus interest.

Moody’s thinks GM is in the same position as it was before the drawn-out deal making: Keeping Opel makes strategic sense. Yet, GM doesn’t have the money to restructure Opel.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href=""> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href=""> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Lorenzo Lorenzo on Nov 10, 2009

    Aaaah, what does Moody's know? GM's Board of Bystanders is gone, replaced by vicious cost cutters and crack financial types, like Whitacre. GM's 3 billion Euro figure is after the 30% cut in costs. It'll probably be financed by selling a minority interest to Magna AND a minority interest to the Russians. Look for the restructuring to include separating the development and IP from the rest of the company so GM retains 100% control. Germany will pay up or "forgive" the bridge loan, or suffer the bulk of the cuts.

  • Psarhjinian Psarhjinian on Nov 10, 2009

    Does GM still owe Opel €2-3B?

  • Jkross22 Jkross22 on Nov 10, 2009

    I really don't understand why people are buying GM products at this point. Why would anyone with any knowledge of this company's behavior want to support it? I guess people are really ignorant or they just don't care. Even if they made the top products in their class, I still wouldn't get it.

  • CarPerson CarPerson on Nov 10, 2009

    The difference between the 3B and 5.8B is the pork General Motors executives lard on to every project for their personal benefit. The GM Way is not to spend a dime for anything unless executive management gets a spiff. After the Gulfstreams were wrenched from their possession in a very public fashion, it would not be surprising to find chartered fully catered 747s buried in the travel expenses. Until and unless GM is fully audited or a whistle blower steps forward, the executive pork will never be challenged.