Tuesday May 26, 05:57 PM
Fiat chief tries to clinch Opel deal in Berlin
By Simon Sturdee
BERLIN (AFP) - The head of Fiat (Milan: F.MI - news) made a last-ditch plea on Tuesday to German Chancellor Angela Merkel to take his bid for General Motors (NYSE: GM - news) ' Opel unit over a Russian-backed offer seen as preferred in Berlin and Detroit (DETROIT.SN - news) .
Amid signs that Canadian auto parts maker Magna is leading the race to snap up GM's struggling European operations, Sergio Marchionne held hour-long talks with Merkel and Economy Minister Karl-Theodor zu Guttenberg.
It was the latest in an intense flurry of meetings as the German government prepares to choose its preferred bidder on Wednesday, "well before" a possible bankruptcy filing by GM, Merkel's spokesman said on Monday.
John Elkann, the representative of the Agnelli family, Fiat's founders and controlling shareholders, was also in town, meeting zu Guttenberg separately.
State premiers where Opel has its main factories have come out clearly in favour of Magna, as have unions, while centre-left members of the governing coalition are also thought to favour the Canadian auto parts giant.
GM itself is also thought to prefer Magna, press reports have said, partly because of bad memories of previous cooperation with Fiat.
But zu Guttenberg insisted after Tuesday's talks that there was no frontrunner and that all three -- the third being Brussels-based RHJ, backed by US private equity firm Ripplewood -- knew they had to improve their offers.
Marchionne said after the talks that he had dispelled a lot of misapprehensions about his bid, reiterating that a merger between the two European automakers would create benefits for both firms.
The final decision on which of the three bids will triumph lies with GM and the US government.
But Germany, where GM has most of its European factories and employees, has a key role to play by offering billions of euros (dollars) in loan guarantees to stop 25,000 employees there losing their jobs four months before elections.
Marchionne said that Fiat had lowered its demand for German state loan guarantees to six billion euros (nine billion dollars) from seven billion euros previously.
GM, which also owns Vauxhall in Britain and Saab (Stockholm: SAABB.ST - news) in Sweden, is working against a June 1 deadline to come up with restructuring measures to convince the US Treasury to keep it afloat with billions of dollars in taxpayers' money.
If it cannot, the Detroit giant will follow Chrysler (Xetra: 710000 - news) into bankruptcy.
Zu Guttenberg over the weekend raised the possibility of letting Opel also file for insolvency but the government has stressed this is a last resort and that they would prefer to find an investor.
Merkel will hold a crunch final meeting on Wednesday, running late into the night if necessary, that will include representatives from GM and the three bidders, sources told AFP.
Marchionne wants to combine GM's European and Latin American operations with Chrysler, in which he has secured a 20-percent stake, to create the world's second largest automaker.
He has said Fiat would cut 10,000 jobs if his bid is successful, including just 2,000 in Germany and no plant closures. Opel's senior union official Klaus Franz said that both Magna and RHJ also wanted to lay off 10,000 workers.
Magna has teamed up with Russia's top bank, state-controlled Sberbank, for a bid that would see precious metals tycoon Oleg Deripaska's truck company GAZ making Opel vehicles in Russia.
Brussels-based RHJ International (Brussels: RHJI.BR - news) , the third bidder, owns stakes in auto parts firms including Niles and Asahi in Japan, Belgium's Honsel, as well as in Columbia Music Entertainment.
Magna, which already assembles Saab, BMW (Xetra: 519000 - news) and Mercedes vehicles under licence and which offered to buy Chrysler from Daimler in 2007, is seen as the favourite in Berlin and Detroit.
To finance its bid, Magna has arranged for a possible four-billion-euro (5.6-billion-dollar) loan from German lender Commerzbank (Xetra: 803200 - news) , sources told Dow Jones Newswires.
Italy's number two bank, Intesa Sanpaolo (Milan: ISP.MI - news) , said Tuesday it was ready to back Fiat.
Chancellor Merkel spoke by phone to Russian Prime Minister Vladimir Putin on Saturday about Magna's offer and on Sunday talked with the firm's owner, Frank Stronach, and chief executive Siegfried Wolf.
--- Dow Jones Newswires contributed to this story ---
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