Berlin  - Chancellor Angela Merkel held talks Monday on the future of ailing carmaker Opel as a debate flared on the company's request for state aid.

Opel is seeking credit guarantees from Berlin to counter a financial squeeze, triggered by dwindling sales and problems with its parent company General Motors.

Taking part in the meeting at the chancellor's office were Opel chief executive Hans Demant, the head of GM's European operations Carl-Peter Forster and the head of the company's employees' council Klaus Franz.

Opel was expected to present details of its financial situation and explain why it needed the government to stump up an estimated 1 billion euros (1.27 billion dollars) in guarantees.

Finance Minister Peer Steinbrueck, who also took part in the talks, earlier ruled out a general programme to stimulate the country's automobile industry.

"The state cannot act as a replacement for private consumption and is not responsible for the errors of the industry," he told the mass-circulation Bild newspaper.

Merkel said she wanted to use the meeting "to get familiar with the situation step by step and search for solutions."

An Opel spokesman has said the carmaker would only make use of the guarantees if the situation of GM deteriorated to the point that production and project development at its German subsidiary were affected.

Economics Minister Michael Glos, another participant at the meeting, expressed concern that any financial support for Opel could find its way to GM, which is facing a serious cash shortage.

"We certainly have to know whether the money will remain in Germany," Glos told German television. "Issues related to the American parent still need to be cleared up."

The US Congress was due to meet this week do discuss a request by GM and fellow automakers Ford and Chrysler for billions of dollars in emergency aid to help them out of the current crisis.

Close to one-in-five workers are employed directly or indirectly in the German automobile sector.

Opel employs 25,700 workers at four factories in Germany, but experts say an additional 50,000 jobs would be at stake if the company were allowed to go to the wall.

Along with other German carmakers such as Daimler and BMW, Opel has announced temporary plant closures after a huge drop in orders.

The state governments of Hesse, North Rhine-Westphalia and Rhineland-Palatinate, where Opel manufacturing plants are located, have signalled a willingness to participate in loan guarantees.

Government spokesman Ulrich Wilhelm said Berlin wanted to avoid setting a precedent. He said the government would do all it could to help the ailing carmaker, but had to take into consideration EU regulations governing competition and subsidies.

Analysts said granting state aid to a single company could be viewed as discriminatory by Brussels and meet with opposition.

The German parliament last week approved a tax rebate for purchasers of new cars as part of a 12-billion-euro package designed to stimulate domestic consumption. (dpa)