28 May 2009
May 28 (Bloomberg) -- General Motors Corp., facing a potential bankruptcy filing, asked for an additional 300 million euros ($415 million) for its Opel unit, stalling talks with Fiat SpA and Magna International Inc., the German government said.The parties will resume negotiations after seven and a half hours of talks failed to produce an agreement. The government hopes to reach a solution by Friday, German Economy Minister Karl-Theodor zu Guttenberg told reporters at 4:30 a.m. in Berlin.
"This was a bizarre night" said Guttenberg. "The talks were turned upside down by GM's unexpected demands. We do not have the assurances we need in order to extend a bridge loan."
Detroit-based GM asked for immediate cash assistance from the German government to keep Opel operating. Chancellor Angela Merkel, facing national elections on Sept. 27, is under pressure from lawmakers and labor unions to save 25,000 German Opel jobs.
"We had a nasty surprise when this demand turned up literally at 8 p.m.," an hour before the talks started, said German Finance Minister Peer Steinbrueck. "We did consider this a bit of an outrage."
Fiat, Magna
Italian carmaker Fiat and Canadian auto-parts maker Magna are the only bidders for Opel, Guttenberg said. An offer from buyout firm RHJ International SA was "dismissed" said Finance Minister Steinbrueck. Fiat and Magna have "equal chances" to buy Opel, though insolvency for the unit still remains an option, Guttenberg said.
Germany went into the talks with the goal of reaching an agreement with U.S. and GM officials to place Opel in a trust that would receive 1.5 billion euros in government loans, government spokesman Thomas Steg said yesterday. Germany won't increase that sum, said Roland Koch, the state premier of Hesse, where Opel is based. Finding the additional cash is "GM's responsibility," he said.
GM is selling Opel as part of a global reorganization that the carmaker must complete by a U.S.-imposed June 1 deadline to qualify for rescue funding. Yesterday GM said its European assets such as plants, sales organizations and technology have been transferred to Adam Opel GmbH, signaling a further separation of the European operations from its U.S. parent.
The move allows for the possible formation of a "trustee agreement" to secure bridge financing from the German government, GM Europe spokeswoman Karin Kirchner said in an e- mail.
Transferring European assets to Opel "will help make sure that the process of finding an investor isn't going to be complicated by a GM bankruptcy," said Tim Urquhart, an automotive analyst with research firm IHS Global Insight in London. "All the indications are that everyone's preparing for a GM Chapter 11 filing."
Opel, founded in 1862 by Adam Opel, started out making sewing machines and bicycles before going on to produce cars, including its "Laubfrosch," or tree frog, model. GM purchased 80 percent of Opel in 1929. Two years later, GM bought the rest of Opel, establishing itself as the biggest carmaker in Europe through the 1930s.
