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Germany will reject Opel aid but explore funding options, sources say

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Germany will reject Opel aid but explore funding options, sources say

Automotive News Europe -- June 9, 2010 10:49 CET

BERLIN (Bloomberg) -- Germany is seeking alternative sources of funding for General Motors Co.'s money-losing Opel unit as the government prepares to officially reject a state-aid request, according to two people familiar with the matter.

Chancellor Angela Merkel opposes granting Opel aid from a government rescue fund set up to distribute loans and assistance to companies affected by the credit crisis, said the people, who asked not to be identified because the matter is not public. Her government is examining options to help Opel, including seeking European Investment Bank funding, they said.

A steering committee for aid assistance will reject GM's application for 1.1 billion euros ($1.3 billion) in federal and regional government loan guarantees because GM has enough cash to restructure Opel and the unit's problems were caused by model failures at the U.S. parent, not the financial crisis, said the people.

The committee, led by Deputy Economy Minister Bernhard Heitzer, will meet in Berlin later today, they said.

GM has been seeking 1.92 billion euros in aid from European countries to fund a reorganization that includes closing a factory in Antwerp, Belgium, as it eliminates 8,300 of Opel's 48,000 jobs.

Europe was the only region where GM posted a loss in the first quarter. The carmaker recorded a $865 million net profit in the first quarter.

“The first responsibility for Opel very clearly rests with GM,” Economy Minister Rainer Bruederle told German public broadcaster ARD television, adding that GM has about 10 euros in free liquidity after fully paying back credits from U.S. and Canadian governments. “GM is able to reorganize itself through its own funds.”

Read more: http://www.autonews.com/article/20100609/ANE/100609867/1308#ixzz0qMktNj3E

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