Merkel looks for Opel solution, despite minister's rejection

Jun 10, 2010, 11:47 GMT

Berlin - Chancellor Angela Merkel was to meet Thursday with the heads of Germany's four states housing Opel factories to find ways of helping the ailing carmaker, hours after Economics Minister Rainer Bruederle had ruled out state credit guarantees.

The previous day, Bruederle formally rejected General Motors' application for 1.1 billion euros (1.3 billion dollars) of state aid, only for Merkel to publicly disagree with her minister, insisting, 'The last word has not been spoken.'

Merkel's upstaging of her economics minister, from the coalition's junior Free Democratic Party (FDP), exposed the depth of an ongoing split within the centre-right government.

On Thursday, Merkel invited the premiers of Hesse, North Rhine- Westphalia, Thuringia and Rhineland-Palatinate to her Berlin office to debate possible solutions protecting Opel's 26,000 German employees.

These four states have been discussing an aid package of their own. Sources said they could seek loans from the European Investment Bank, which is owned by European governments.

Bruederle defended his decision to reject GM's request, insisting that the car giant had found no bank prepared to carry its fair share of the credit risk.

'Opel has found a banking consortium that is willing to provide credit, but only under the condition that the bank is freed of any credit risk,' Bruederle said.

'I interpret this to mean that there are serious doubts over the sustainability of the proposals, and that banks consider a repayment of their credit to be uncertain,' the minister added.

Earlier, the head of Opel's workers' council, Klaus Franz, had accused Bruederle of lying over claims that no bank had offered the carmaker a credit.

On the contrary, Franz said Opel and its UK sister brand, Vauxhall, had signed deals with Deutsche Bank in Germany and Barclays Bank in Britain.

Last year, GM rejected a German government offer to lend Opel 4.5 billion euros, provided GM sold Opel to a new owner. GM then requested the loan guarantees from a German fund set up for companies hit by the global economic crisis.

GM employs 48,000 people at Opel factories across Europe, of whom roughly half are in Germany.

Britain, Spain, Austria, Hungary and Poland had said they would aid their Opel factories with a further 800 million euros, but only if Germany provided the bulk of the aid.

The GM unit has already decided to close a factory in Antwerp, Belgium.

The carmaker, which first called for state aid in November 2008, wants to slash 8,300 positions in Europe and cut capacity by 20 per cent.