GM has decided to keep its European operations, Opel and Vauxhall. Now, it has to figure out how to pay for them.

Opel owes the German government over $1.3 billion in bridge financing. It may have that on its balance sheet. What it does not have is the capital needed to restructure operations and carry the operation through a recession in the auto industry that is likely to last at least another year.

Of course, the US taxpayers could be a source of Opel bailout money, and probably will be.

GM has taken some $50 billion in US government capital to take it through Chapter 11 and though a period of losses from its North American operations. GM almost certainly make money in China, so it cash flow problems are in the US, and, now, Europe.

GM is faced with going to the Treasury Department to explain why US money will be used to save the jobs of European workers. GM may argue that it will cut Opel’s costs though lay-offs and that GM Europe will become profitable quickly while it remains the parent of a company which just a week ago was going to be sold to Canadian car parts firm Magna( NYSE:MGA) and a consortium of Russian financiers.

Taxpayers won’t get a vote in the process. Treasury probably won’t challenge GM’s plan to keep Opel. The case that the US company is stronger long-term with its European operations intact is probably a good one.

Taxpayers do, however, get to pay for European worker salaries while car company employee are laid in the US. It is another clever part of the American government’s job creation package

Douglas A. McIntyre

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.