Relief in Germany at Opel deal, but questions remain

Relief in Germany at Opel deal, but questions remainBerlin - Most Germans breathed a sigh of relief on Saturday when the government announced a rescue plan for struggling carmaker Opel, but not everyone was happy with the deal.

Under a memorandum of understanding reached with US auto giant General Motors, Canadian parts supplier Magna International agreed to take over GM's European arm that includes the German carmaker and Britain's Vauxhall.

In return, Chancellor Angela Merkel's government will supply a bridging loan of 1.5 billion euros (2.1 billion dollars), place Opel in a trust until a final deal is signed, and make available 4.5 billion euros in loan guarantees to Magna and its Russian partners Sberbank and carmaker GAZ.

The government-sponsored move is designed to save Opel from bankruptcy, following the anticipated insolvency of GM, which is expected to seek court protection from its creditors next week.

"It's a great relief for us," said Klaus Franz, head of the works council representing 26,000 employees at Opel's four German plants. "It was the correct decision for Magna to come aboard."

"You can be certain that we did not come to this decision lightly," Finance Minister Peer Steinbrueck said, adding that the deal posed risks for all those involved.

But Economics Minister Karl-Theodor zu Guttenberg said he still had reservations about the deal, reached after two lengthy sessions of negotiations at Merkel's office in Berlin.

"I have a different perception of the risks involved than my colleagues involved in the Opel talks. I could not therefore support Magna's concept and favoured an orderly insolvency as a new beginning for Opel," he said.

The minister was supported in this view by Professor Hans-Werner Sinn, president of prestigious economic research institute Ifo.

"Bailing out (Opel) without going into insolvency is tantamount to saving old capital investments. A rescue with insolvency would mean saving the company as well as jobs."

Magna has indicated that up to 11,000 of the 55,000 GM jobs in Europe could go as a result of the takeover, but has not made clear where. It stressed that the four Opel plants in Germany where 26,000 are employed would all stay open.

British Business Secretary Peter Mandelson said he was hopeful the two Vauxhall plants in Britain, where 5,500 workers are employed, would be saved.

But he said the deal reached in Berlin "will involve change" to GM's European operations because "there is excess capacity."

At a fractious EU meeting in Brussels on Friday, ministers expressed concern that Germany might break solidarity and reach a deal on Opel without considering other GM subsidiaries in Europe.

Magna, founded by Frank Stronach, an Austrian who emigrated to Canada, is the world's third-biggest components supplier to the car industry and also assembles vehicles.

Its long-term goal is to boost Opel's annual production to 5 million units with the help of its Russian partners. One million of these are intended for the Russian market.

Russia would like to assemble Opel models at car plants operated by GAZ, whose own range of models are hopelessly out of date, according to industry experts.

With a population of 142 million, "Russia offers enormous potential for the Magna consortium," says German car industry analyst Ferdinand Duddenhoefer, pointing out there are only 200 cars on the road for every 1,000 Russians, compared to 500 for every 1,000 Germans. (dpa)