Saturday May 30, 04:39 PM
Opel rescue raises hopes
By Richard Carter
BERLIN, (AFP) - German auto-workers expressed relief Saturday after a dramatic deal to save iconic car maker Opel, but Chancellor Angela Merkel warned of a bumpy ride ahead with the industry in turmoil worldwide.
The deal, struck in the early hours of Saturday morning after marathon talks, sees Canadian parts maker Magna and its Russian backers taking over Opel as its parent company General Motors (NYSE: GM - news) prepares to file for insolvency.
But while Germany's 25,000 Opel workers cheered the deal, Merkel -- who faces a general election in four months -- underlined the scale of the challenge facing the reborn company and its employees.
"For Opel and Magna, the work is now just beginning and there are several difficulties still to overcome," she told reporters.
Government sources said Magna was likely to slash around 2,500 jobs at its four plants around Germany, but stressed that all four factories would stay open, a pledge repeated by Magna bosses after the talks.
Nevertheless, General Motors employs some 50,000 people throughout Europe and Magna plans to cut about a fifth.
In total, GM employs around 7,000 in Spain, 4,700 in Britain at Vauxhall, 3,600 in Poland, 2,600 in Belgium and 1,800 in Italy.
The head of Opel's powerful works committee, Klaus Franz, was also cautious.
"I am very happy that we have managed to save Opel and that the company will not be dragged down by the insolvency of GM," Franz told AFP.
"But difficult times are still ahead of us ... Germany is not a land of milk of honey, that means there will be job losses."
"The most important thing is that the social dimension is being taken into account and that there will be no factory closures," he added.
Belgian union official Rudi Kennes, of the socialist FGTB union at Opel's Antwerp plant, gave a cautious welcome Saturday to the deal, telling the Belga news agency there would be talks with the new owners in the coming weeks.
Derek Simpson, joint leader of Unite, Britain's biggest trade union, expressed concern for the future of the two British plants.
But while the officials from Magna had struck him as "very professional", he still expected "long and tough negotiations", he told Belgian television.
"That's where I think the (British) government has to be more proactive and recognise that it has to some extent been watching in the stands while the action has been taking place on the pitch."
Britain's Business Secretary Peter Mandelson said Friday he was seeking an early meeting with Magna to build on their previous commitment to keeping production at Britain's Vauxhall plants.
In Canada meanwhile, Magna boss Frank Stronach told the Globe and Mail newspaper he wanted Opel cars to be built in Canada.
Analysts also warned against euphoria, given the still parlous state of the global car industry.
"All this seems to rest on a very fragile base. Let's say there is a 60- or 70-percent chance that it won't work," said Juergen Pieper, an automotive expert at Metzler bank.
Frank Schwope, from NordLB bank said the Canadian-Russian investors "will try everything, and then fail and Opel will be insolvent in two or three years."
He doubted that Magna, a rags-to-riches car parts maker with little experience of manufacturing cars, was the right fit for Opel.
The deal, backed by Russia's state-controlled Sberbank, will see Russian automaker GAZ making Opel vehicles in Russia, as well as maintaining Opel and Vauxhall production elsewhere in Europe.
Germany played a major role as it agreed to stump up billions of euros (dollars) in loan guarantees and emergency loans to keep the ailing company afloat.
Government sources confirmed on Saturday that Berlin would give loan guarantees of 4.5 billion euros, including 1.5 billion euros in short-term loans to tide Opel over.
Magna has pledged to cough up 300 million euros for Opel's immediate financial needs.
Merkel acknowledged that talks over the future of GM Europe had sometimes been difficult. Germany's Finance Minister Peer Steinbrueck denounced what he said were "scandalous" US negotiating tactics.
A more conciliatory Merkel on Saturday said a telephone call to President Barack Obama had helped seal the deal. But she lashed out at what she said had been "huge mismanagement" by GM executives.
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