German government to decide on preferred Opel partner

Germany's government is due to decide on Wednesday which bidder or bidders it prefers as a partner for the Opel unit of struggling US carmaker General Motors.

Chancellor Angela Merkel's government has been considering offers from Italian carmaker Fiat, Canadian supplier Magna International and Belgium-listed industrial holding RHJ International.

However, in an unexpected twist, Chinese carmaker Beijing Automotive Industry Holding Co (BAIC) emerged as a last minute contender. A spokesman for Berlin's Economy Ministry said the company had submitted a bid late on Tuesday.

The global motor industry has suffered acutely from a worldwide economic slowdown. In Germany, it remains a potent symbol of the country's post-war industrial boom and export-driven growth.

GM will make the final decision on who buys Opel, but Berlin's view is crucial as it is being asked to stump up billions of euros worth of loan guarantees as part of any deal.

Opel has 25,000 workers at four plants in Germany and the future of the carmaker has become a politically charged subject in the runup to to September's federal election.

The meeting starts at 1900 GMT although a group of ministers will meet before midday for a preliminary discussion. The politicians could decide on one or more preferred bidders.

Pressure to agree on a partner is building ahead of a June 1 restructuring deadline for GM set by the US government, which could lead to a Chapter 11 bankruptcy filing by the Detroit-based carmaker.

 

INSOLVENCY

Some members of Merkel's Christian Democrats (CDU) are reluctant to see the state take on significant new commitments to save Opel and some are pushing for an "orderly insolvency" of the carmaker.

Economy Minister Karl-Theodor zu Guttenberg said on Tuesday there was no favourite and insolvency remained an option if the bidders did not make credible commitments to preserve German jobs and showed a willingness to assume greater risks.

Last week, ministers said the Magna bid, backed by Russian investors, looked to be the best of the three but since then the bidders have improved their offers.

Fiat Chief Executive Sergio Marchionne made a last-ditch push to persuade Berlin to back his plan to fold Opel into a transatlantic car empire that would also include US carmaker Chrysler, saying on Tuesday he had lowered his request for state guarantees to €6 billion (Dh31 billion) from €7 billion.

Germany's Frankfurter Allgemeine Zeitung, citing an internal government assessment, said Berlin had become sceptical about Magna as it was not investing any of its own capital in Opel and would leave the carmaker with billions of euros in debt.

 

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