Friday May 29, 03:04 AM
Germany to hold further talks on Opel takeover
BERLIN (AFP) - German officials were to hold further talks Friday to try to clinch a rescue deal for General Motors (NYSE: GM - news) ' Opel unit ahead of an expected bankruptcy filing, even after talks with Washington broke down in acrimony.
Chancellor Angela Merkel was expected to hold further negotiations in the afternoon with the US government, GM and the two bidders still in the race to snap up a stake in Opel: Italian car giant Fiat (Milan: F.MI - news) and Canadian auto parts maker Magna.
German officials remained confident of reaching a deal despite the marathon talks, aimed at finding a suitable buyer for Opel and a financing structure for temporary loans from the German government, stalling when the US side suddenly upped their demand for loans by 300 million euros (416 million dollars).
"I am very confident" that a deal can be reached, said Foreign Minister Frank-Walter Steinmeier on Thursday, adding that he would call his US counterpart, Secretary of State Hillary Clinton, to discuss the issue.
Finance Minister Peer Steinbrueck also said he was sure that a solution could be found to secure GM's European operations and tens of thousands of jobs across Europe.
But the surprise US move prompted furious reactions, with Steinbrueck slamming the US negotiating tactics as "scandalous" and Economy Minister Karl-Theodor zu Guttenberg saying the talks were "at times absurd".
Opel's powerful works council described the breakdown in talks as a "bitter setback" and accused GM of treating Opel as a "chip in the poker game of their own insolvency."
The United States rebuffed the charges. "We believe it was a constructive dialogue," a US government official told reporters by telephone in Washington, speaking on condition of anonymity.
"We would strongly resist the notion that the US government was either uninterested... or trying to make any last-minute math. None of that is true."
The negotiators are racing against a June 1 deadline set by US President Barack Obama's administration for General Motors to come up with a rescue plan or be forced into bankruptcy like Chrysler (Xetra: 710000 - news) before it.
In a key development on Wednesday, GM transferred assets and patents to Opel in a bid to keep them safe in the event of a GM bankruptcy.
And in a dramatic 11th-hour move on Thursday, a proposed bankruptcy reorganisation plan was unveiled, which would give the US government a 72.5 percent stake in GM, a regulatory filing showed.
Fiat and Magna remained in the race after a third bidder, Brussels-based investment firm RHJ International (Brussels: RHJI.BR - news) , pulled out during the talks.
Magna's offer, backed by Russia's state-owned bank Sberbank, is still seen as the front runner, with unions and centre-left Social Democrat members of the governing coalition backing it.
For its part, Fiat wants to combine General Motors' European and Latin American operations with Chrysler, in which it has secured a 20-percent stake, to create the world's second largest automaker after Japan's Toyota.
Chancellor Angela Merkel is under pressure from all sides to find a way to break the deadlock, with some 25,000 German jobs at stake just four months before a national election.
GM employs 55,000 people Europe-wide, including around 7,000 in Spain, 4,700 in Britain at Vauxhall, 4,000 in Sweden at Saab (Stockholm: SAABB.ST - news) , 3,600 in Poland, 2,600 in Belgium and 1,800 in Italy.
Although the final decision on the fate of GM's European operations lies with Detroit (DETROIT.SN - news) and Washington, Germany has a key role to play as it will provide billions of euros in loan guarantees to a suitable bidder.
Analyst Christoph Stuermer from Global Insight said he was confident a deal would be thrashed out on Friday and added Fiat would have to match an offer by Magna to provide the missing 300 million euros.
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