Page last updated at 14:18 GMT, Saturday, 17 October 2009 15:18 UK

Germany defends Opel deal

GM flag in front of Opel building
Opel and Vauxhall employ about 45,000 people in Europe

Germany says EU concerns about the sale of carmaker Opel to Canada's Magna do not put the deal at risk.

Economy Minister Karl-Theodor zu Guttenberg said the deal was "on track" and ministers could address EU doubts.

The European Commission warned on Friday that planned state aid for Opel might breach competition rules.

Brussels said there were "significant indications" Berlin pledged the 4.5bn euro ($6.7bn; £4bn) aid only if its preferred buyer for Opel was chosen.

Joe Lynam
BBC business reporter Joe Lynam

Even though the German government said it was all a misunderstanding, there's no doubt that Berlin has had something of a blind spot when it comes to Opel.

Magna cleverly played the electoral card with Angela Merkel (who was seeking a second term as chancellor) by promising fewer job cuts in Germany and more in Opel/Vauxhall plants in Spain, Britain and Belgium.

But Magna may now have to dig deeper into its pocket if it wants to control Opel/Vauxhall.

No-one can ignore or brush aside the strict EU rules on state aid. But countries can take advantage of the delays in the legal process, which might stop or reverse mergers.

From the sidelines Britain's Business Secretary Lord Mandelson is privately gloating, having previously warned Germany it was choking the competitive process by publicly backing Magna over rival bids.

On Friday, Competition Commissioner Neelie Kroes wrote to Mr Guttenberg and pointed to "significant indications" that aid to Opel was subject to the precondition that a Magna was selected as buyer - a stance that would run counter to EU competition rules.

Asked whether the concerns could doom the sale to Magna, Mr Guttenberg said: "No, I don't believe that."

Although GM picked Magna and its Russian backer Sherbank last month to buy Opel and Opel's UK brand Vauxhall, the deal has yet to be concluded.

However, Chris Preuss, GM's global vice-president for communications, said that if the proposed sale to Magna "couldn't pass EU regulations, we'd have no recourse but to reconsider the deal".

"Right now though we are working on a defined agreement with Magna and it's a complicated process with a lot of dialogue," he added.

"There are a lot of discussions going on at the moment, and there's a lot of detail to be ironed out between the German government and the EU."

Other government fears

In response to the Competition Commission involvement, UK Business Secretary Lord Mandelson said in a statement: "We have advised the German government and Magna from the outset that the Commission would have to give clearance and that is why there had to be no real or apparent shortcomings in the process."

"There is no alternative to following the rules. We hope this will not be delayed, " he added.

Both the Belgian and Spanish governments said last month that they wanted the Commission to study Germany's role in the sale of Opel.

Magna's proposed deal with GM will see it take a 55% stake in Opel, with GM keeping 35% and 10% going to employees.

Opel currently employs about 50,000 people across Europe, including 5,000 at its Vauxhall business in the UK, and 25,000 in Germany.

Magna is proposing 10,500 job cuts in total at Opel, including 4,500 in Germany.

Despite Magna being yet to conclude its takeover of Opel, earlier this week it secured an agreement with the UK union Unite over job cuts at among the 5,500 workers at the two Vauxhall plants in Ellesmere Port and Luton.

Magna has agreed to limited job loses to 600 people, and only through voluntary redundancy.

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