Opel deal slammed

With federal elections just two weeks away, top-ranking German politicians are celebrating General Motors' decision to sell ailing carmaker Opel to Canadian-Austrian car parts maker Magna.

The deal is seen in Germany as a coup for Chancellor Angela Merkel whose government had pressed hard for GM to choose a consortium of Magna and Sberbank of Russia, offering 4.5 billion euros in German taxpayers' money. But the euphoria may be short-lived if a report in news magazine Der Spiegel is confirmed.

The magazine said on Saturday that Magna plans to lay off more employees in Germany than previously thought. On top of 3,000 jobs in the production lines, another 1,100 are to be scrapped in the administration, it said. The Magna deal was favored in Germany as it promised to preserve more jobs than rival bidder RHJ International.

Around half of GM's 50,000 strong European work force is based in Germany and Opel's new owners have pledged to keep open its four main plants in the country.

But the carmaker also employs thousands in Spain, Britain, Belgium, Italy, Austria and France. And fears are now growing that the new owners, Magna and Sberbank of Russia, might axe jobs in other European sites in a bid to minimize losses in Germany.

GM vice-president John Smith said in Berlin this week that Opel's new owners were "contemplating" winding down a plant in Antwerp, Belgium, and shifting some production from Spain to Germany.

State negotiator slams Opel deal

Making matters more complicated for Chancellor Angela Merkel's government, the representative of the German federal states at the Opel negotiations, Dirk Pfeil, also described the Opel sale to Magna as a "serious mistake."

In an interview with radio station Deutschlandfunk on Saturday, Pfeil said had he would not have taken part in the discussions had he “known that it was going to be a purely political decision, and that business management considerations would be left in the shadows.”

“It is unique in my professional life that the party which has been acting as guarantor also decides on the buyer. That is a bit odd and it does not fit into the system," Pfeil said.

EU warns of action against protectionism

General Motors announced this week it will sell 55 percent of its European subsidiary Opel to Magna and its Russian partner bank Sberbank and carmaker Gaz. GM will only retain a minority stake of 35 percent, while ten percent is to be held by Opel employees.

The Opel sale to Magna has also attracted the interest of the European Commission. On Saturday, European Union Competition Commissioner Neelie Kroes warned she will take action if there is any protectionism in the sale.

The Belgian government says it wants the EU Commission to investigate the Opel deal amid concern that Germany allegedly sought to protect its own plants at the cost of others.

Kroes was quoted as saying Saturday that "if something happens against the rules, I will take action." Kroes added that state support should not be tied to factory locations.

Merkel denies deal was politically motivated

Chancellor Merkel on Saturday however dismissed fears that the EU Commission could put the brakes on the deals or block Berlin's package of government aid for Opel.

In the Sueddeutsche newspaper, she pointed out that the general framework of government aid from which the billions for Opel are to come have already been approved by the Commission.

There's also criticism from within Germany that Berlin's pressure on GM to favor Magna was mostly politically motivated. With general elections coming up on Sept. 27, the two parties in the current grand coalition needed a quick solution to the Opel problem and a solution with as little job cuts within Germany as possible.

Analysts warn, however, that the true cost of the deal and more details about layoffs will be known only after the general election. Chancellor Merkel on Saturday dismissed that the Opel rescue was politically motivated.

"We are not rescuing corporations, but are maintaining a chance for them in the financial crisis," Merkel told the Sueddeutsche Zeitung newspaper.

"But of course the company needs a solid concept for the future. Any company then has to prove itself on the market, there's no way that the government can take off that pressure."

ai/dpa/AP/Reuters
Editor: Sonia Phalnikar