Germany Debates Bailing Out Troubled Carmaker Opel | Business| Economy and finance news from a German perspective | DW | 28.02.2009
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Germany Debates Bailing Out Troubled Carmaker Opel

The German government is debating whether to help ailing carmaker Opel after US parent company General Motors said it planned to spin off its German arm, which needs 3.3 billion euros ($4.2 billion) to survive.

The logo of German car factory Opel is seen in Ruesselsheim

Germany to the rescue? Opel could be lined up for temporary state aid

German Chancellor Angela Merkel on Saturday, Feb 28, reacted cautiously to calls for her government to prop up stricken automaker Opel.

Speaking at a meeting of her Christian Democratic Party (CDU) in the northern city of Kiel, Merkel said her government would need to carefully examine an Opel rescue plan outlined by US parent company General Motors before a decision on a bail-out could be taken.

The chancellor, whose government has passed a major bailout package for banks and two economic stimulus plans worth billions, said there were "clear rules" governing state aid.

It needs to be ascertained whether a company's troubles are triggered by the global financial crisis and whether it can continue to operate strongly in the long-term, the chancellor said.

Earlier, German Economy Minister Karl-Theodor zu Guttenberg discussed Opel's future with the premiers of the four states where Opel plants are located.

The talks served to "explore various plans of action," according to the minister. He added that the discussion would intensify once Opel revealed exact details of its rescue plan.

Opel needs billions to survive

On Friday, the head of GM Europe, Carl-Peter Forster, said Opel needed 3.3 billion euros in aid to survive and to aviod job cuts and closures. He also said the German carmaker would be split off into a separate unit.

Speaking at a press conference at Opel's headquarters in the western city of Ruesselsheim, Forster said General Motors Europe would present the rescue plan to German authorities on Monday. He added that the plan it included 3.0 billion euros from GM itself along with around one billion euros in cost savings.

"We need all three parts of the plan" to ensure its success, Forster said.

He added that Opel would repay any state aid by 2014-2015, but said that "as a result of the automobile market crisis we are now in a very tough situation."

Opel looking to break from GM

Opel and GM logos

Opel could break from GM after 80 years of marriage

Opel's activities would be regrouped within an independent unit as part of the plan, Forster said, adding that no decisions had been taken yet regarding possible plant closures.

"But it is a fact that we find ourselves in an exceptional economic situation and that we will eventually have to consider closing sites," he said.

Press reports have said that an Opel factory in the western city of Bochum is threatened and that another in eastern Eisenach might be sold.

Opel itself must remain a part of GM, though its capital could be opened up to third parties or partnerships could be created, Forster said.

The rescue plan was required by German authorities before any public aid would be granted to Opel, which has been hit by a global auto slump and massive financial problems at GM.

GM Europe works committee chief Klaus Franz told media that Opel should be transformed into a European company, or SA, which would allow the participation of outside investors.

"After 80 years, GM is prepared to cede parts of Opel," Franz said.

He called the management's plan "very viable" and said it had been approved by workers' representatives.

Government to analyze Opel situation Monday

Economics minister Karl-Theodor zu Guttenberg

Zu Guttenberg will discuss plans for Opel next week

General Motors is not in much of a position to help its German subsidiary, after posting a loss of more than $30 billion in 2008.

Meanwhile, other reports said Opel and German car manufacturer Daimler, maker of Mercedes-Benz autos, were in negotiations over the possible sale of one of Opel's factories.

Opel's plant in the central city of Eisenach might could go to the luxury car maker, resulting in the construction of a new Mercedes factory in Hungary "possibly being abandoned," the Thueringer Allgemeine newspaper said.

The company was examining "to what extent the Hungarian project could be stopped," sources said.

Daimler said last year October it would build the factory in Hungary at a cost of about 800 million euros to boost production of smaller models.

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