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Opel's fate hangs on Berlin meeting to discuss aid

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Opel's fate hangs on Berlin meeting to discuss aid

May 12, 2010 07:31 CET

FRANKFURT (Reuters) -- The German government's loan guarantee committee was meeting Wednesday to discuss Opel's request for 1.5 billion euros ($1.89 billion) in state aid, three days after the ruling center-right coalition suffered a bitter defeat in a key regional election.

Germany is the only major European country that has not approved aid to keep Opel and British sister brand Vauxhall afloat with money backstopped by taxpayers.

Preconditions before Germany offers aid include proof that the German-based, General Motors Co. unit fell into difficulty no earlier than the summer of 2008 as a direct result of the financial crisis, as well as locating banks willing to finance the loans.

"PricewaterhouseCoopers, the economics ministry's own independent expert, certified Opel was profitable until September 2008 and moreover has a positive future thanks to its new model range," Opel Deputy Chairman Klaus Franz told Reuters, warning that 120,000 jobs in Germany depended on the carmaker.

"I await the outcome with both great hope and great expectations."

Liberal Economics Minister Rainer Bruederle has, however, often signaled his reluctance to approve a federal contribution to any aid package.

Opel CEO Nick Reilly, who expects a final answer from Berlin by the end of this month, said on Friday generous contributions from other main Opel countries -- likely Spain and the UK -- meant Germany might be on the hook for less than 1.3 billion euros.

Reilly declined to provide specifics of the package, such as which banks may have signed up to participate in the loan.

"We have made significant progress in this regard," an Opel spokesman said, referring to talks with lenders.

Relations between Berlin and Detroit have been frosty since early November when GM scrapped the sale of a majority stake in Opel to Magna International Inc., a deal that was heavily favored by Chancellor Angela Merkel.

GM initially saw its funding responsibility to its European subsidiary as completed once it paid back the remaining 600 million euros of an emergency loan from the German government, which Detroit needed to do by the end of November to regain 65 percent of the shares held by a trustee.

Itself on life support since last June when Washington gave it a $50 billion bailout, the U.S. carmaker came to realize Berlin wouldn't lift a finger following November's rift unless GM stepped provided more of a commitment. In March, GM said it would commit 1.9 billion euros in loans and even fresh capital to Opel.

Read more: http://www.autonews.com/article/20100512/ANE/305129969/1193#ixzz0niwpe0vV

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