Merkel hits out at GM over Opel revamp (2nd Roundup)

Nov 10, 2009, 14:14 GMT

   Berlin - German Chancellor Angela Merkel lashed out Tuesday at giant US carmaker General Motors over its handling of its troubled European offshoot Opel as company announced the name of the executive who is to take charge of Opel's restructuring.

Speaking to parliament, Merkel said GM has not been in a position to fulfil its responsibility as Opel's parent company for months, adding that she regretted the Detroit-based carmaker's decision announced last week not to sell its European unit.

   'I deeply regret the decision of GM,' Merkel said, adding that the carmaker would have to bear most of the cost of Opel's restructuring.

   'But the Opel workers need more than our regret, they need a concrete solution, a solution that offers job security,' she said.

   With this in mind, the chancellor went on to call on GM to produce as quickly as possible a restructuring plan for Opel, which includes business operations in Germany, Belgium and Spain as well as Britain's Vauxhall brand.

'We expect GM to present a reliable plan for Opel quickly,' said Merkel.

   Her comments came as GM prepared to unveil this week its restructuring plan for Opel, which are likely to include the European unit having more independence in the US auto group's global empire.

GM veteran Nick Reilly is to lead Opel's restructuring, the company said Tuesday, following the decision of Carl-Peter Forster to stand down as chief executive of GM Europe.

British-born Reilly, who is at present the company's international chief, is to take over the post of GM Europe head on a temporary basis.

   GM said last week it plans to restructure its European unit itself instead of hiving off a majority stake to a consortium comprising Canadian parts manufacturer Magna International, Russian state-owned Sberbank and Russian carmaker Gaz.

   Adding to the tensions surrounding Opel's future, Magna's deputy chief, Siegfried Wolf called on GM Tuesday to return investment funds, during an interview on Austrian radio.

   Plunging car sales resulted in GM launching earlier this year a major makeover of its global operations, including selling off Opel.

   But since then, the carmaker has emerged from bankruptcy and a new GM board has been appointed. Also, there are signs the economic crisis has abated for the global car industry and the world economy in general.

   Moreover, the shift in the global market to smaller more energy efficient cars adds to the appeal for GM of retaining a controlling stake in Opel and the technology backing up its compact European car models.

   Germany has offered 4.5 billion euros in state-backed guarantees to help with the restructuring of Opel, which is currently being propped up by a 1.5-billion-euro (2.2-billion-dollar) bridging loan from Berlin.

   But a solution to Opel's problems 'can only work if GM takes over the lion's share of the restructuring costs, which also means that it has to pay back the bridging loan,' Merkel said.

   In September the international financial advisory group KPMG told the GM board in a report it would need up to 6.1 billion dollars to retain its European subsidiary.

   However, Merkel is also under pressure from her new coalition partner, the business-friendly Free Democrats, not to make fresh financial promises to help Opel.

   GM chief Frederick 'Fritz' Henderson arrived in Germany on Monday ahead of the company setting out its proposals for Opel.

'Fritz Henderson confirmed that Opel will regain its previous strength and that it will have a high degree of independence and autonomy in the GM group,' said Opel union leader following talks with Henderson.

GM is also considering slashing Opel's more-than 50,000 European workforce by 10,000.

   While this is in line with Magna's plans for the GM offshoot, both German unions and the nation's political leaders fear that Germany's Opel operations could face bigger job cuts under GM as well as the closure of plants.

   About half of Opel's workforce is employed in four factories in Germany. Magna had already announced plans to cut Opel workforce in Germany by 4,000.

   But Merkel told parliament: 'We expect the company in the future to be as committed to its European sites as to its American ones.'