Just weeks ago, General Motor's European subsidiary Opel was all grins with plans to unveil its Chevy Volt-look-alike, the Ampera.  However, in the weeks since GM has been forced to cut 47,000 jobs and go before the federal government pleading for more money.  With the hard economic reality settling in, GM has announced that Opel will no longer be part of GM.

While many have speculated that Saab or Hummer would be the first brand or subsidiary on the chopping block, it turned out to be Opel.  GM is hoping that Europe will pay it to give Opel independence.  As part of the deal, GM is demanding the German government and other countries in Europe with Opel plants to give it $4B USD to bail out Opel, says GM Europe CEO Carl-Peter Forster.

Mr. Forster states, "We are in need of capital that we hope to get with the help of the public sector of about 3.3 billion euros.  With this aid, we believe that we can lead this company to a very profitable future."

On Monday, GM will formally present its plan to the German government.  The split will mean that Opel will be tasked with managing its own expenses and making its own decisions.  However, GM retains a major stake in Opel -- between 25 and 50 percent -- and the companies will likely work together closely.  Describes Mr. Forster, "Opel remains an integral and important part of GM's global operations and will continue as such in the future."

Klaus Franz, a representative of Opel's labor organization, states, "Today we have received confirmation that after 80 years owning this company, General Motors is willing to give up some shares in Opel."

Mr. Franz is concerned that the move may result in Opel plants closing down.  GM has not announced officially whether this will happen, but has said it will try to avoid it if possible.  Mr. Forster continued, "No decisions to close plants or cut jobs have been made. We are trying to prevent that.  But we do have cut costs substantially, by about $1.2 billion."

Over half of GM's cars are currently sold outside of North America.  However, sales in Europe and elsewhere have fallen nearly as much as American sales, so GM is starting to exit these markets, as evidenced by the spinoff of Opel and proposed sale of Saab. 

In total GM's European subsidiaries, Saab, Opel and Vauxhall (UK) employ over 55,000 Europeans.  With a net loss of $9.6B USD in Q4 2008 and $30.9B USD for the year, GM is fast finding that it simply cannot afford to maintain its European businesses.

Even with the move, GM is still teetering on the brink of financial ruin, with cash having fallen to $14B USD after burning through $6.2B USD in Q4 2008.  GM has says it needs between $11B USD and $14B USD in cash at all times to stay in business.  However, even if the U.S. government lends GM a helping hand to fix its cash deficiency, serious questions about its long term prospects remain, given that it is looking to sell or part with two of three European brands and cut back on its overseas sales.