Dusseldorf, Germany (CNSNews.com) – As the global financial crisis lashes the auto industry, Germany’s federal and state governments look set to bail out Opel, a subsidiary of General Motors Corp., with a reported two billion euro ($2.6 billion) rescue package.
Opel’s German management, which requested the aid, is struggling with a cash-flow crisis.
German managers point to failings at GM’s insolvency-threatened U.S. head office in Detroit. They claim they are back-owed billions of dollars in investment.
Germany’s GM-Opel management is also considering breaking away from General Motors Corp. should it apply for insolvency.
Opel employs more than 25,000 people in the German states of Hessen, Thuringen, North-Rhine Westphalia and Rhineland-Pfalz.
Chancellor Angela Merkel called for an emergency meeting in her office on Monday afternoon to discuss options with GM’s European president, Carl-Peter Forster, GM-Opel chairman Hans Demant, and union boss Klaus Franz. Also attending were Finance Minister Peer Steinbruck and Minister for Economic Affairs Michael Glos.
Proposals on the table include a federal bond or guarantee of around $1 billion. This would be supplemented by another $1 billion guarantee from the four affected German states. The funds are reportedly needed to allow the cash-strapped company to continue manufacturing and to pay its creditors.
Merkel said after the meeting further talks were necessary before a final decision was taken.
According to figures supplied by the European Automobile Manufacturers Association (ACEA), new car registrations have fallen in Europe for six consecutive months. Europe-wide registrations in October were down 14.5 percent year-on-year.
General Motors’ total registrations of just under 86,000 cars was 25.9 percent down compared to October 2007. Germany’s total monthly figure of 258,814 cars was down 8.2 percent on October 2007.
Despite the cross-party aid-package for Opel, leading politicians reject broader measures to secure the car industry as a whole.
“A general economic package to stimulate the car industry doesn’t make sense,” Steinbruck told the Bild newspaper. “The state can’t replace private spending and isn’t responsible for failings of the industry either.”
The prime ministers of North-Rhine-Westphalia, Hessen and Rhineland-Pfalz all voiced support for a taxpayer-financed rescue-package, with North-Rhine-Westphalia premier Jurgen Ruttgers quoted as saying, “We won’t let Opel go down.”
But warnings about the rescue measures are also being voiced across the political spectrum. The prime minister of another state, Lower Saxony, Christian Wullf, warned against a subsidy race.
Binding conditions should be attached to the guarantees, he told the Neue Presse daily.
The president of the German Institute for Economic Research, Klaus Zimmermann, said there was “a danger that U.S. losses will be transferred to Germany.”
Helping one company would mean helping its competitors too, should the need arise, he said, warning of “a bottomless pit.”
A representative of the giant IG-Metall labor union also voiced concern, calling for politicians to attach stronger than usual conditions to the proposed measures.
Union spokesman Armin Schild also called for a reduction of Opel’s dependency on GM in Detroit.
Opel managers are reported to be considering options for a breakaway from GM, should the situation in Detroit worsen and if GM applies for insolvency.
Meanwhile, Cologne-based Ford of Europe, Opel’s U.S.-owned competitor, has said that it won’t be asking for state aid.