Germany blames America after Opel rescue talks collapse

29th May 2009, Comments 0 comments

The talks fell apart when, at the last minute, GM and the US government demanded an extra 300 million euros in temporary loans from Berlin to keep Opel afloat.

Berlin -- Germany lashed out at the United States over the breakdown of talks on the future of Opel Thursday but managed to select two final bidders for the GM unit: Italy's Fiat and Canada's Magna International.

The marathon negotiations were aimed at finding a suitable buyer for General Motors' struggling European operations, with the German government willing to offer billions of euros (dollars) in loan guarantees to any potential investor.

But at the last minute, GM and the US government demanded an extra 300 million euros in temporary loans from Berlin to keep Opel afloat, a tactic slammed by German Finance Minister Peer Steinbrueck as scandalous.

Fresh talks on Opel are scheduled for Friday ahead of a June 1 deadline set by US President Barack Obama's administration for General Motors to come up with a rescue plan or be forced into bankruptcy like Chrysler before it.

Speaking to reporters early Thursday morning, Steinbrueck said: "We were unpleasantly surprised when this new demand came out of the blue at 8:00pm local time (1800GMT). We found that pretty scandalous."

"GM again confronted us with new figures," said Economy Minister Karl-Theodor zu Guttenberg, adding that the US government "could have made more of an effort" with its choice of representative at the discussions.

"We have made a fresh request to the US Treasury and we expect a response before Friday," he said, calling Washington's input so far "marginal, to put it politely."

Declaring Opel insolvent is also still an option, said zu Guttenberg.

Roland Koch, the influential premier of the state of Hesse, where Opel's headquarters are situated, said the Americans had not provided sufficient guarantees that Germany would get its temporary loans back.

Speaking on local radio, Koch said: "What the Americans are doing here is not acceptable. They are ignoring the situation in Europe and are trying to push through their own agenda."

Opel's powerful works council described the breakdown in talks as a "bitter setback" and accused GM as treating Opel as a "chip in the poker game of their own insolvency."

"Europe is not a gamblers' casino," the council said.

In a key development on Wednesday, GM transferred assets and patents to Opel in a bid to keep them safe in the event of a GM bankruptcy.

Two bidders, Italian car giant Fiat and Canadian auto parts maker Magna International, remained in the race after a third bidder, Brussels-based investment firm RHJ International pulled out during the talks.

Magna's offer, backed by Russia's state-owned bank Sberbank, is still seen as the front runner, with unions and centre-left Social Democrat members of the governing coalition backing it.

The Canadian firm has also promised to come up with the 300 million in additional funds, a move welcomed by German authorities.

For its part, Fiat wants to combine General Motors' European and Latin American operations with Chrysler, in which it has secured a 20-percent stake, to create the world's second largest automaker after Japan's Toyota.

Chancellor Angela Merkel is under pressure from all sides to find a way to break the deadlock, with some 25,000 German jobs at stake just four months before the country goes to the polls.

Berlin has also come under fire from other European countries with Britain and Belgium pressing Germany not to protect their workers at the expense of employees elsewhere.

GM employs 55,000 people Europe-wide, including around 7,000 in Spain, 4,700 in Britain at Vauxhall, 4,000 in Sweden at Saab, 3,600 in Poland, 2,600 in Belgium and 1,800 in Italy.

Although the final decision on the fate of GM's European operations lies with Detroit and Washington, Germany has a key role to play as it is stumping up a good deal of the cash to keep the factories going.

Christoph Stuermer from Global Insight said he was confident a deal would be thrashed out on Friday and said Fiat would have to match Magna's offer to provide the missing 300 million euros.

"I think first everyone needs to get a good night's sleep ... then Opel will be allowed to fall safely into the cushion," he said.

"But then Opel still needs to be put a little on its own feet. That hasn't been achieved and that's not going to be achieved by Friday," he added.

Simon Sturdee/AFP/Expatica

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