EU governments pull back from Opel subsidy war

24th November 2009, Comments 0 comments

European governments have pulled back from a subsidy war feared by EU commission officials as US auto maker General Motors prepares swingeing job cuts in Europe.

BRUSSELS - GM is due to deliver a new business plan by the end of the week, which would involve the loss of some 10,000 European jobs and for which it is seeking up to 3.3 billion euros (almost five billion dollars) in financing.

It comes after an earlier deal under which GM was to sell its European unit Opel/Vauxhall to Canadian parts company and a Russian bank was abandoned amid political pressure over Germany's willingness to offer most of that sum.

Ministers and the new head of GM Europe met with European Commission officials who worry that state aid towards restructuring at Opel and Vauxhall could come with political strings attached.

A commission statement said the talks were designed "to ensure transparency and shared information" in order to "avoid subsidy races between member states and the fragmentation of the single market.

"The participants agreed that member states will make no formal commitment before the next coordination meeting based on GM's restructuring plan" on December 4, it added.

GM operates plants in Germany, Britain, Spain, Poland, Austria and Hungary.

Talks began between ministers, commissioners and GM Europe's Nick Reilly, who said he outlined "in broad terms what the restructuring plan would be" but stressed that GM's Europe staff would be the first to be told the details later this week.

He said the manufacturer was looking for public support in the "medium term" but argued that a revamped business plan "will not be influenced by any particular government giving particular money."

Reilly then left and the EU colleagues agreed to place a moratorium on individual negotiations with the company before fresh collective talks on Friday week.

"There was no discussion about the amount of state aid," said Kris Peeters, the head of the regional Flanders government.

However, he said, "it is very important that GM knows that Europe will react in a coordinated way and not individually.

"Finally there will be a coordination at European level," he insisted.

He had earlier said Belgium's offer of up to 500 million euros to keep a northern Antwerp factory open is "still on the table."

Germany is home to about 25,000 workers, roughly half of GM Europe's total.

German magazine Spiegel said the company had received offers of 400 million euros from Britain and between 300 and 400 million euros from Spain, as well as proposed tax breaks from Poland.

European Union Industry Commissioner Guenter Verheugen wants to ensure there will be no national jobs "auction" at a time of high unemployment, which is expected to keep growing at least throughout 2010.

Jochen Homann, German secretary of state for economics, also said Berlin "won't take part in a competition."

Britain was represented by junior minister for business Ian Lucas. A spokesman said London has "always said we will offer aid" but that it would be consistent with commission state-aid competition rules.


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