Germany considers Opel request for loan guarantees

18th November 2008, Comments 0 comments

The German chancellor said the company told her it might need assistance to overcome a possible liquidity crisis in the medium-term.

Berlin -- German Chancellor Angela Merkel said Monday that her government would decide by Christmas on a request by ailing carmaker Opel for credit guarantees.

Speaking after talks with Opel managers in Berlin, the chancellor said the company told her it might need assistance to overcome a possible liquidity crisis in the medium-term.

Before credit guarantees are granted, the company would have to ensure that the money would stay with Opel in Germany and not be used by its troubled parent General Motors, she said.

Opel is seeking credit guarantees from Berlin to counter a financial squeeze, triggered by dwindling sales and a massive cash shortage by GM.

Among those taking part in the talks at the chancellor's office were Opel chief executive Hans Demant and the head of GM's European operations, Carl-Peter Forster.

"I believe we have sent an important signal to the people, especially the workers," the chancellor said after the hour-long meeting, which was also attended by her economics and finance ministers.

Forster said Opel did not have a short-term liquidity problem but needed credit guarantees for a little over 1 billion euros (1.27 billion dollars) "as a precaution against a worst-case scenario."

An Opel spokesman said earlier the carmaker would make use of the funds only if the situation of GM deteriorated to the point that production and project development at its German subsidiary were affected.

The US Congress was due to meet this week do discuss a request by GM and fellow automakers Ford and Chrysler for billions of dollars in emergency aid to help them out of the current crisis.

Close to one-in-five workers are employed directly or indirectly in the German automobile sector.

Opel employs 25,700 workers at four factories in Germany, but experts say an additional 50,000 jobs in ancillary industries would be at stake if the company were allowed to go to the wall.

Along with other German carmakers such as Daimler and BMW, Opel has announced temporary plant closures after a huge drop in orders.

The state governments of Hesse, North Rhine-Westphalia and Rhineland-Palatinate, where Opel manufacturing plants are located, have signaled a willingness to participate in loan guarantees.

Government spokesman Ulrich Wilhelm said earlier the government would do all it could to help the ailing carmaker, but had to take into account EU regulations governing competition and subsidies.

Analysts said granting state aid to a single company could be viewed as discriminatory by Brussels and meet with opposition.

Opposition Greens Party spokeswoman Renate Kuenast said any government help for Opel should be linked to a pledge the company would concentrate on making more environmentally friendly cars.

The German parliament last week approved a tax rebate for purchasers of new cars as part of a 12-billion-euro package designed to stimulate domestic consumption.

Opel was Germany's biggest automobile manufacturer when it was taken over by General Motors in 1929.


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