Page last updated at 15:37 GMT, Tuesday, 31 March 2009 16:37 UK

Merkel offers state aid for Opel

Opel needs cash to help it through the economic downturn

German Chancellor Angela Merkel has given assurances that any investor in General Motors (GM) subsidiary Opel will have state support.

Ms Merkel was speaking at Opel's headquarters the day after President Obama said the US government would not bankroll the troubled US carmaker.

She said: "We must lay the foundation for the creation of a European Opel."

New GM boss Fritz Henderson also said on Tuesday that he was prepared for the company to go through bankruptcy court.

He said the company needed to cut costs "deeper and faster".

"We'll either get it done out of court or we'll get it done in court, but we are going to get it done."

Part of the plan to cut costs could include selling off parts of its European arm.

GM Europe is seeking 3.3bn euros (£3.1bn; $4.4bn) to survive, and has asked the German government for help.

Earlier on Tuesday, the German finance minister said private investors were interested in Opel.

Potential saviour

Ms Merkel said that an investor would "of course have state support".

"I am assuring you of that explicitly, not only for the state governments, but also for the federal government. We have the tools for that," she added.

However, she hinted that taking a direct stake in Opel was not a priority for the government.

"For all that the state can do, it never was the best entrepreneur," she said.

"We need GM," the chancellor also acknowledged. "And I say with confidence that GM also needs Opel."

She said a negotiating team would be put together this week, combining members of Germany's federal and state governments, and investment bankers, to discuss Opel's future with GM and the US government.

The German government has rebuffed all pleas for help thus far, making it very clear that it will not consider providing any state aid without a detailed restructuring plan from GM Europe.

So far, it has been unimpressed by GM's proposals.

Above all, ministers want assurances that no German taxpayer money will be used to bail out Opel's US parent.

But the German government is not the only potential saviour of Opel.

Opel factory
Opel needs cash to help it through the economic downturn

"There are interested parties and these parties could become investors," said Germany's Economy Minister Karl-Theodor zu Guttenberg earlier on Tuesday.

"There are investors and they are serious," he added.

He also explained that they would not, like the German government, make any investment without much more detailed recovery plans from GM Europe.

For its part, GM Europe said that "initial outreach to third-party investors has been promising, but GM Europe must achieve its benchmarks for labour restructuring and liquidity as soon as possible".

Opel employs 25,000 workers in Germany.

Earlier this month, GM's top executive warned that the European division of General Motors, which comprises Saab and Vauxhall as well as Opel, could collapse within weeks without European governments' help.

This, he said, could cost up to 300,000 jobs.

Breaking up

President Obama's decision not to provide significant funding to GM means that external investment is Opel's only hope for survival.

It will be one of many GM brands to become at least partly independent.

Fritz Henderson, GM's new chief executive, is known to be more receptive to the idea of breaking up what was, until this year, the world's largest carmaker than his predecessor Rick Wagoner, who was forced to quit by President Obama on Sunday.

Following Mr Obama's announcement that the US government would not bankroll GM, however, he has little choice.

Indeed, reports suggest that GM will announce the sale of Hummer - one of 13 brands owned by GM - imminently.

Bankruptcy

On Monday, President Obama said GM had 60 days to come with a much more aggressive restructuring programme.

He also said that bankruptcy may be the best option for the troubled carmaker that is haemorrhaging billions of dollars, a month after sales collapsed in the economic downturn.

It has already taken $13.4bn from the US government and has requested another $16.6bn.



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