Given the wide-ranging cuts announced by the government yesterday, perhaps General Motors and Opel/Vauxhall were right to drop out of the running for €330 million of loan guarantees. GM said earlier this week that it was no longer intending to rely on the coalition government for the financial package, seemingly having become frustrated by the drawn-out process of getting it approved, as well as a similar offer from the Spanish government. Negotiations for a package from Germany have stalled.
GM cited its improved financial strength as one of the reasons for deciding to go it alone, but stressed that its requirements had not materially changed. Some €11 billion will now be invested by GM into Vauxhall/Opel to develop new products. “With these new products and the impact of restructuring, we expect to return to profitability shortly,” said Nick Reilly, president of GM Europe.
The decision not to pursue loan guarantees by GM contrasts with the example of heavy engineering firm Sheffield Forgemasters, which was still seeking an £80 million loan promised by Lord Mandelson. The money would have been used as part of the bill for buying and installing a giant forging press for making ultra-large components for the nuclear industry.
The loan, which could have generated income for the taxpayer, would have helped Sheffield Forgemasters to transition to a position among a small number of engineering firms globally capable of supplying large components such as pressure vessels to the nuclear power industry.
The question marks now hanging over the forging press project could put dampers on the desire to “buy where we build” on the part of Westinghouse and other nuclear firms. Talk will now turn to considering sources of finance for the press in the hope that the project can be resuscitated. But the £80 million loan offer made by the Labour government was predicated on the condition that no other commercial backing was available to Forgemasters. Therefore it seems uncertain that the company will be able to access the financing it needs.
Adrian Bull, UK stakeholder relations manager for Westinghouse, says his firm was prepared to contribute tens of millions to the forging press project. “It is a great disappointment. Our participation is still on the table if there is a way to replace that £80 million, although we recognise that that’s going to be very difficult. We’re not walking away from the proposal.
“The fact that we were in there in the first place is a very strong signal of our faith in the UK supply chain. It would have been great to have Sheffield Forgemasters with its skills and expertise making those components and bringing value back to the British economy.”