Germany delays €1bn Opel bailout

GERMAN CHANCELLOR Angela Merkel has held off on granting a €1 billion liquidity guarantee to car manufacturer Opel.

The move comes amid concerns it could be swallowed up by its struggling US parent company, General Motors (GM).

The German firm has had to close factories temporarily in the face of plunging sales, while the difficult credit market has left the company short of operating capital and funds for product development.

After meeting leading executives from GM and Opel, Dr Merkel said the government would decide before Christmas on the case for state aid – buying time until US politicians decide the fate of GM.

German auto industry experts estimate that more than 100,000 jobs are at risk if the German company collapses: 26,000 workers in five Opel factories around the country, the rest in secondary suppliers.

“The two car companies are lying on their death bed and, without government money, it’s very hard to see how the patients can be revived,” said Prof Ferdinand Dudenhöffer, an auto industry expert at the University of Duisburg-Essen.

GM stock slid to a record low last week after a German economist rated company shares as worthless. The Detroit company’s fate is inextricably linked to the firm’s founded by Adam Opel in 1862 and bought by the US company 79 years ago.

Opel has struggled for years. After reaching a record 20 per cent domestic share in the 1970s, Volkswagen and other rivals have squeezed the company to just 10 per cent today.

Financial market experts have warned that the precarious situation of GM could mean that Berlin guarantees do not benefit Opel workers or the European car industry. “With the international nature of General Motors and Opel, one has to be very careful that state aid with German tax money isn’t simply transferred into the bankruptcy proceedings,” said Deutsche Bank chief economist Norbert Walter.

Federal finance minister Peer Steinbrück has ruled out auto industry hopes for a wide-ranging economic programme.

“Such a programme makes no sense,” he said. “The state cannot replace the purchasing power of private individuals. Nor can it be responsible for industry mistakes.”

Meanwhile, the KfW, Germany’s state-owned development bank, announced a nine-month loss of €1.8 billion yesterday.

The loss arose from a €1 billion charge on the sale of troubled IKB bank to an investment consortium. Another €200 million disappeared in Iceland while €400 million was lost in the Lehmann Brothers collapse – €300 million of which was transferred as it teetered on the brink of bankruptcy.