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Germany cool to GM aid

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Germany cool to GM aid

Panel opposes $1.3B in loan guarantees for restructuring Opel

Christine Tierney / The Detroit News

General Motors Co. is getting a cool response in Germany to its request for aid for its Adam Opel GmbH carmaker.

Economy Minister Rainer Bruederle said Tuesday that a government-appointed panel of labor and industry experts did not support GM's application.

GM has not seen the panel's recommendation, a spokesman said, but the German newspaper Handelsblatt said it opposed aid -- purely on economic grounds.

The decision now lies with Bruederle and Chancellor Angela Merkle.

"The government could raise political reasons if they wanted to support the company," Deutsche Bank said in a research note.

The government also will hear from a group of senior federal and state officials, who will meet on Friday to discuss GM's request for $1.3 billion in loan guarantees for Opel.

GM has agreed to pay for roughly half of a $5 billion restructuring of Opel, based in Rüsselsheim, near Frankfurt. It recently negotiated more than $1 billion in savings and concessions over the next four years from its European workers.

Last year, Germany was ready to back a bid for Opel led by Magna International Inc. But now that GM is profitable and is keeping Opel, German officials are less inclined to consider aid.

Merkel is preparing to cut the German budget after helping to bail out debt-saddled Greece.

"We cannot possibly tell the people, 'You have to put up with higher costs,' while we're propping up a company like GM that is perfectly able to cope by itself," said Michael Fuchs, a lawmaker in Merkel's ruling party.

Bruederle said a decision was likely to be announced late this week or next. "It's an open secret that I have viewed the whole matter with skepticism from the beginning," he said.

GM's restructuring plan for Opel entails more than 8,000 job cuts out of a workforce of 48,000. It will close an assembly plant in Antwerp, Belgium, if it doesn't find a buyer by the end of September.

European carmakers and investors quietly oppose assisting Opel when there is excess car-making capacity in Europe. "In our view, a decision against government support would be incrementally positive for the European auto industry, as capacity reductions would likely be accelerated," Deutsche Bank said.

From The Detroit News: http://www.detnews.com/article/20100602/AUTO01/6020337/1148/auto01/Germany-cool-to-GM-aid#ixzz0phR3gc10

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