Four German states to seek separate solution with Opel (Roundup)

Jun 10, 2010, 16:14 GMT

Berlin - The four German states home to Opel factories decided Thursday to seek a solution for ailing carmaker Opel without federal intervention, after Economics Minister Rainer Bruederle ruled out state credit guarantees.

The premiers of Hesse, North Rhine-Westphalia, Thuringia and Rhineland-Palatinate announced the decision after meeting Chancellor Angela Merkel to discuss ways of protecting Opel's 26,000 German employees.

Kurt Beck, the premier of Rhineland-Palatinate, criticised Merkel after the meeting, and said she had offered no new solutions for Opel.

'We are all bitterly disappointed,' said Beck, who is of the opposition Social Democrats (SPD).

The previous day, Bruederle formally rejected General Motors' application for 1.1 billion euros (1.3 billion dollars) of state aid for subsidiary Opel.

Hours later, Merkel publicly disagreed with her minister and said she would discuss the issue with the four state premiers, adding, '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.

The four states were open to new negotiations with Opel and its US owner, General Motors, according to North Rhine-Westphalia's premier Juergen Ruettgers. He said that a number of possibilities were being discussed, but did not go into details.

Sources have said one possibility could be to seek loans from the European Investment Bank, which is owned by European governments.

Opel now needs far less than the 1.1 billion euros originally requested by GM. Opel boss Nick Reilly estimated that the carmaker had shortfalls of around 400 million euros.

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.

FDP leader Guido Westerwelle said Bruederle had made the right decision, adding that GM was sufficiently solvent to not need German taxpayer support.

'If the states decide differently, this is not a matter for the federal government,' Westerwelle added.

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.

The US car giant was largely nationalised last year, but has since repaid its loans and is reporting profits, which has raised questions over its demands for state aid to rescue Opel.

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.