Fiat pulls out of crucial Berlin talks on Opel takeover

May 29, 2009, 7:43 GMT

Turin, Italy - Italian carmaker Fiat pulled out of key talks set to take place in Berlin on Friday on the future of its German rival Opel.

A statement by Fiat released in Turin said it would not attend the afternoon meeting called by Chancellor Angela Merkel with Opel's US parent General Motors and two companies vying for control of Opel.

Fiat is one of the two bidders still in the race along with Canadian-based auto parts manufacturer Magna.

An earlier marathon round of talks broke up early Thursday without result after GM had unexpectedly announced the need for extra financing to keep its European operations afloat.

Explaining Fiat's decision to skip the talks, chef executive Sergio Marchionne said the new demand by GM 'would force Fiat to support Opel financially and leave it open to unnecessary and irrational risks.'

German Economics Minister Karl-Theodor zu Guttenberg has made it clear that, unless the potential investors further improved their bids, a possible Opel insolvency would remain on the table.

Talks were due to resume on Friday at 1600 (1400 GMT), by which stage Guttenberg expected feedback from the bidders and from the US.

Between them, the parties need to negotiate over the new shortfall in bridging funds resulting from the revised figures GM presented Wednesday.

Any final decision on Opel's future rests with GM and the US government, but Germany hopes to salvage GM's European operations through a proposed 1.5-billion euros (2 billion dollars) bridging loan, administered by an interim board of trustees.

GM has pledged to transfer Vauxhall and other European GM subsidiaries to the Opel brand, based in Germany but owned by GM in Detroit until a buyer is found.

Bidders also reportedly expect the government to pay more than 5 billion euros to clear Opel of pension and labour compensation claims.

The European Commission warned the German government on Thursday to heed EU law in its attempt to rescue Opel.