Germany says GM management still wants to sell Opel

BERLIN/FRANKFURT Tue Aug 25, 2009 4:55pm EDT

1 of 7. A flag of GM (General Motors) is seen next to an Opel logo at the Opel plant in Bochum August 25, 2009.

Credit: Reuters/Ina Fassbender

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GM may consider keeping Opel

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BERLIN/FRANKFURT (Reuters) - Germany believes the management of General Motors Co GM.UL is still committed to finding a buyer for its European unit Opel, government officials said on Tuesday after talks with the U.S. automaker in Berlin.

At a meeting on Friday, GM's board of directors postponed a decision on management's proposals to relinquish a controlling stake in Opel either to Canadian automotive group Magna MGa.TO or Belgium-based finance investor RHJ (RHJI.BR).

A GM source told Reuters on Monday the company was considering a third alternative that would see it inject billions into Opel to hold onto the company, although people close to the talks believe this is a bargaining tactic.

The formerly bankrupt U.S. carmaker, which is a ward of the state, would need to raise 1.5 billion euros alone just to pay back Berlin's bridge loan before it then can raise enough money to fund Opel's operations until it generates cash itself.

After Tuesday's meeting with Germany's Opel taskforce in Berlin, however, GM's management board "had made it clear" it was still interested in a buyer, a German official told Reuters on condition of anonymity.

Economy Minister Karl-Theodor zu Guttenberg later said that GM management was still telling Germany it is "interested in an investor solution," but that the GM board may have balked at making a decision because its new members are not up to speed with negotiations.

"It seems they don't really have a good idea of the state of negotiations .... I must say this lies in a knowledge deficit," he said in an interview with ZDF television, adding that he felt this was normal for a new board.

One major sticking point preventing GM from picking Germany's preferred candidate, Magna, was Berlin's insistence that Opel still has access to GM's centralized patent unit GTO, a company source close to the talks told Reuters on Tuesday.

Last week's failure to choose a buyer disappointed both politicians and labor in Germany, with unions threatening "spectacular measures" to force a decision.

Opel's senior labor leader, Klaus Franz, told Reuters on Tuesday that the 25,000 German workers would not contribute the $1.2 billion in structural costs requested by management if GM refused to sell to Magna.

"GM can decide on a win-win solution where the employees are willing to make concessions or a brutal and endless confrontation with unions," Franz said.

Labor traditionally plays an influential role in Germany, and its fierce opposition to Fiat SpA (FIA.MI) severely weakened the Italian carmaker's position in talks with GM and the German government about Opel.

RHJ ALTERNATIVE FLOPS IN GERMANY

In an internal letter to staff seen by Reuters, GM Europe President Carl-Peter Forster criticized Franz's colleagues for demanding back vacation pay -- a concession first offered by German unions that they are rescinding as a warning measure to Detroit to cease postponing a sale to Magna.

"The payment of the vacation bonus impacts the liquidity of the company by creating cash losses on a European level. Plus, this reaction will not succeed in accelerating the decision process at all," he told Opel employees.

Talks to sell Opel have dragged on for months and are a political hot potato ahead of German elections in September, because of the state support required for the eventual buyer.

Despite prodding from GM's top negotiator on the deal, John Smith, Chancellor Angela Merkel and the German states refused to back RHJ's rival bid over their preference of Magna.

News on Monday that GM was considering dropping plans to relinquish control of Opel altogether and instead raise $4 billion to keep the unit flummoxed German politicians.

Because GM is barred from using funding from the U.S. government to support its international operations, one of the options could include raising money by selling or mortgaging the automaker's assets in China, one source said.

"By not selling Opel/Vauxhall, GM has essentially two options -- providing 3 billion euros ($4.3 billion) to continue operations (less than the 4.5 billion promised by the German government) or liquidation," credit analysts at UniCredit said.

(Additional reporting by Angelika Gruber, Tom Kaeckenhoff, Maria Sheahan, and Brian Rohan; Editing by Will Waterman and Maureen Bavdek)

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