Germany rejected General Motor's plea for targeted aid for German car factories. A government plan to subsidize car sales also unraveled, suggesting that Berlin had not yet reached a final decision on auto industry aid.
Owned by GM, Opel's employees are calling for pay raises despite the economic crisis
With US-based GM teetering, the multinational's German arm Opel had earlier written to German Chancellor Angela Merkel requesting she push harder for a 40 billion euro ($51.4 billion) loan from the European Investment Bank (EIB) to carmakers.
Opel also requested loans to German buyers of new cars and a government buy-in of elderly cars to stimulate the flagging German car market.
GM, the world's largest carmaker, meanwhile appealed to its 55,000 workers in Europe to skip pay increases. A German labor leader, Rainer Einenkel, rejected that, saying Opel workers wanted raises.
After dropping 23 percent on Monday, GM shares fell another 11 percent Tuesday to $2.99, a 65-year low. Deutsche Bank analysts predicted the share prices would fall to zero.
Tax breaks for low-emissions cars
Cleaner cars will be rewarded with tax breaks under the current German plan
No automotive aid in addition to that adopted by Merkel's cabinet last week was planned, a government spokesman told the German DPA news agency.
Merkel's coalition government agreed last week on an economic stimulus package that includes a suspension of vehicle tax for one year on new cars bought in Germany, with a double rebate for low-emission cars.
However, that plan came unstuck Tuesday, Nov. 12, with the parliamentary caucus of the Social Democratic Party objecting to its equal treatment of large and small cars. Social Democrats, who share power with Merkel's Christian conservatives in a coalition government, demanded a preference for smaller cars that use less fuel.
Critics also said the rebate, expected to cost the government 1.4 billion euros, would be a free gift to consumers who had been planning to buy cars anyway.
Observers said reopening the issue might conceivably lead to aid that would be more similar to Opel's proposals.
BMW to idle plant
BMW will be stopping production at one plant during a prolonged winter break
The government spokesman said in Berlin the EIB credit to the auto industry was likely to be decided by European Union leaders at a summit next month. He defended Berlin's stimulus package, saying it also included loans to smaller companies, which could be claimed by many auto industry suppliers.
In another sign of the industry's surplus inventory of unsold cars, premium maker BMW confirmed it would idle one of its factories for four weeks. The site at Regensburg would close from Dec. 8 until Jan. 7, BMW said in Munich. Several other German carmakers, including Daimler and Volkswagen, have said they would temporarily shut down or extend holiday breaks at their plants.