Blow for GM as Berlin Rejects Opel Aid Request

Automakers European chief says decision would not affect GM's restructuring plans.

Germany left General Motors with a huge funding gap Wednesday for restructuring the company's loss-making Europe unit Opel/Vauxhall, turning down a GM request for 1.1 billion euros in loan guarantees.

Economy Minister Rainer Bruederle said he had rejected GM's application for help, equal to US$1.3 billion, from a federal bailout fund set up to assist firms stung by the recession, because the U.S. auto giant had enough money itself.

"I am confident that Opel has a good future without credit guarantees," Bruederle said as he announced his decision.

"GM is naturally very disappointed, as is Opel, with this decision," GM Europe chief Nick Reilly told reporters. "I don't particularly understand the reasons why."

But the door to public money may not be definitively closed to the Detroit giant, which emerged from bankruptcy and posted its first quarterly profit in three years in the first three months of 2010.

German Chancellor Angela Merkel on Thursday was set to discuss possible options with the heads of the four German states where Opel has four plants and employs some 23,000 workers, around half the European total.

These states, have been "very supportive" of Opel in the past and might provide between a quarter and a half of the 1.1 billion euros in guarantees requested from the federal government, Reilly said.

"As far as today's decision is concerned .... I want to make clear that the last word on the future of Opel hasn't been spoken yet," Merkel said in Berlin.

GM is prepared to pump 1.9 billion euros into its restructuring plan, which foresees around 8,000 job cuts, and wanted 1.8 billion euros in loan guarantees from European governments including the 1.1 billion euros from Germany.

Reilly said that the government in Britain, where GM owns Vauxhall, had agreed to guarantee 330 million euros in loans and that Spain has "indicated ... a similar type of amount."

"Depending on what the Laender [German states] might do ... it could end up leaving us with something like 400 million [euros] to find somewhere else," Reilly said.

He said that Berlin's decision would not affect GM's restructuring plans.

"It's certainly my objective to carry out the plans we have," he said.

Unions, which fear that GM will now close some of its German plants, immediately slammed Bruederle's decision, with Opel works council chief Klaus Franz calling it "shameful."

"The economy minister is leaving Opel staff standing in the rain, counter to the facts and counter to the interests of the plants in Germany," Franz said.

Germany was ready last year to provide guarantees to Opel if GM sold it to Canadian auto parts maker Magna and Russian lender Sberbank, but GM scrapped the deal in October, annoying Berlin in the process.

Merkel, whose popularity has fallen sharply in recent months, is seen as wary to hand out more taxpayers' money after promising tens of billions of euros in guarantees to prevent a eurozone collapse.

Merkel "would have difficulty justifying aid for Opel," said Stefan Bratzel, head of automobile research at Germany's University of Applied Sciences (FHDW) in Bergisch Gladbach.

Copyright Agence France-Presse, 2010

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