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Business

Chancellor Merkel Locked in Emergency State Aid Talks with Opel

Chancellor Merkel is holding an emergency meeting with Opel's management to work out a plan to aid the troubled carmaker. But two Cabinet members emphasized an industry-wide bailout was not the solution.

Adam Opel statue

Founder Adam Opel could not have envisaged the troubles his company now face

"I have invited the head of (Opel) Germany, the head of Europe and the union representative so we can discuss on Monday the situation at Opel," German Chancellor Angela Merkel told reporters ahead of an emergency meeting of major economies here to deal with the global financial crisis.

"The federal government, the economy minister and the finance minister are going to take control of this matter," she said of the talks with Opel, a unit of faltering US auto giant General Motors.

Opel employees head to work

Opel has factories in four German states

Press reports in Germany said the talks on Monday, Nov. 17, would focus on up to two billion euros ($2.5 billion) in possible public loan guarantees to Opel, funds that General Motors, itself on the verge of bankruptcy, cannot provide.

The weekly magazine Focus reported Monday that the federal government would be prepared to guarantee one billion euros and the states of Hesse, North Rhine-Westphalia, Rhineland Palatinate and Thuringia, where Opel has plants, would cover the second billion.

Ahead of the meeting, German Finance Minister Peer Steinbrueck ruled out a financial rescue package for the auto sector.

"An economic program for the entire automobile industry makes no sense," Steinbrueck told the mass-circulation daily Bild, adding that the state is "not responsible for errors committed by industrialists."

Economy Minister Michael Glos has also voiced opposition to a bail-out plan for the auto industry, which has been hit by a major drop in sales due to the global economic slowdown.

Request for credit guarantees

Rain drops on an Opel logo

Opel has requested state aid to get through stormy times

Opel, which employs some 25,000 people across Germany, said on Friday it had asked Berlin and regional states for credit guarantees to ensure its financing.

The request follows a GM announcement that, in the wake of global market turmoil and the crisis in the US automobile sector, it would be seeking help in countries where it has major operations.

"The aim of the current discussions is to make preparations for guaranteeing further loans because the global financial situation of our parent company General Motors has worsened," supervisory board chairman Klaus Franz said Friday.

"We want to ensure Opel's future in Europe but also jobs, which is why we have the full support of our employees," his statement added.

Opel said loan guarantees, if needed, would cover investment in product development and assembly plants at sites in Germany "and under no circumstances outside Europe."

It said the conditions for the guarantees were being hammered out with experts from the German government and the states affected.

Production suspended at factories

American flags and GM logo

GM has said it would seek aid in the countries where it has major operations

Last month, GM said that effects of the international financial crisis and economic slowdown had led it to interrupt production at two German plants that employ more than 6,500 people.

Opel said on Monday it had asked Merkel to help Germany's ailing auto sector with measures including tax incentives for new car purchases, the establishment of low-cost consumer loans and a bonus for taking cars more than 10 years old off the road.

The maker of the Astra and Corsa models is also seeking a pan-European plan worth 40 billion euros to provide low-cost loans from the European Investment Bank.

Members of Merkel's governing coalition agreed this week to scrap the tax on new cars bought in the first half of 2009, with cars that emit fewer greenhouse gases exempt for up to two years.

General Motors, meanwhile, is threatened by a looming liquidity crisis and has also asked the US government for aid. According to the weekly Der Spiegel, also to be published Monday, it owes Opel billions of dollars.

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