Tensions rise as Germany races for Opel deal

BERLIN/MILAN Fri May 29, 2009 9:16am EDT

1 of 5. A truck loaded with cars leaves the Opel assembly plant in Antwerp, May 29, 2009.

Credit: Reuters/Francois Lenoir

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BERLIN/MILAN (Reuters) - Germany raced to overcome a transatlantic spat and growing tensions among Opel bidders to clinch a deal for the German carmaker on Friday, as parent General Motors hurtled toward bankruptcy.

As the clock ticked down to a June 1 restructuring deadline, widely expected to lead to a Chapter 11 filing for the U.S. automaker after it sealed a crucial sweetened deal with bondholders on Thursday, GM's Saab unit was granted more time to restructure by a Swedish court.

In Germany, efforts to forge a rescue for GM's European unit were under threat after Italy's Fiat said it would skip crucial talks and a source said frustration was rising at rival bidder Magna.

The bidders scrambled to submit preliminary contracts setting out plans for bridge financing and a temporary trustee scheme to protect Opel's assets before a rapidly approaching 8 a.m. EDT deadline.

A first round of talks earlier this week between the German and U.S. governments, the bidders and GM collapsed amid mutual recriminations.

Fiat CEO Sergio Marchionne spoke out on Friday in a move one analyst said was the first step in Fiat pulling out of the running.

Marchionne said he was still interested in Ruesselsheim-based Opel, which employs 25,000 staff in Germany, but "more cannot be asked"

Marchionne is juggling a deal to buy assets from U.S. automaker Chrysler -- expected to close as early as Friday -- with a bid for Opel, as part of his ambitious plan to create a European auto giant.

Marchionne said "the emergency nature of the situation cannot put Fiat in a position to take extravagant risks." Marchionne said it was "unreasonable" to expect Fiat to provide funds to a group whose finances remain unknown.

Fellow bidder Magna International is also growing increasingly frustrated with new demands from GM, after coming close to a basic agreement during talks that went on until the early hours of Friday, a source close to the negotiations said.

Magna's co-Chief Executive Don Walker told Reuters late on Thursday that it would be open to collaborating with Fiat or other European automakers, if it was a "win-win" situation.

Elsewhere, French carmaker Renault and its Japanese partner Nissan Motor Co pledged to squeeze out more cost savings from their partnership as the automotive industry worldwide battled a deep crisis.

Loss-making Saab, which first sought protection from its creditors in February, was granted an extension until August 20 to line up a new owner and restructure its business.

Swedish business daily Dagens Industri reported late on Thursday that the two front-runners to buy Saab were Swedish luxury carmaker Koenigsegg and U.S. financier Ira Rennert and his Renco Group, with Italy's Fiat in third place.

Saab and GM are due to name a preferred candidate among three remaining unnamed bidders in the coming weeks.

In the UK, a newly-launched car scrapping scheme boosted sales by 35,000 units in two weeks, the government said.

And world number two truckmaker Volvo said it would withdraw redundancy notices for 600 workers in Sweden after striking a deal on work hours and pay with unions.

India's Tata meanwhile, which has bought the Jaguar and Land Rover brands from Ford for $2.3 billion last year, reported a smaller-than-expected 50.7 percent drop in full-year net profit.

(Reporting by Ian Simpson, Noah Barkin, Madeline Chambers, Helen Massy-Beresford, Victoria Klesty, Philipp Halstrick, John McCrank; writing by Helen Massy-Beresford, editing by Marcel Michelson and David Cowell)

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