Berlin - The German government is ready to guarantee funds for ailing carmaker Opel but any money it provides to the General Motors' unit must stay in Germany, Chancellor Angela Merkel said on Monday.
A decision on whether the carmaker would need a guarantee from the federal government and German states should be made by Christmas, Merkel said after meeting Opel executives.
GM Europe Chief Carl-Peter Forster said the Opel unit would need an amount of just over 1 billion euros ($1.27 billion).
Opel is going through a financial rough patch that has been aggravated by troubles at its parent GM, which said earlier this month its cash holdings would fall short of the minimum needed to run its business without new funding or other drastic action.
Speaking at a news conference after meeting Opel executives and Forster, Merkel said: "We discussed a possible guarantee that would secure a medium-term liquidity requirement.
"It's not yet been decided whether such a guarantee would even be necessary. It depends on developments in the United State," Merkel said. "But from the German government side, we've said we want to constructively examine the possibility."
Troubles in the car sector are a major worry in Germany, Europe's largest economy, where close to one in five workers is employed, directly or indirectly, in the sector.
On Friday, Opel became the first European carmaker to turn to a government for help, asking for guarantees to finance its development and assembly facilities should GM stop supplying cash. The carmaker employs about 25 000 in its German plants in Ruesselsheim, Bochum, Kaiserslautern and Eisenach.
Forster said Opel would keep any state funds in Germany.
"If they're needed they'll stay here," he said. "We're looking for a vehicle to ensure that. We're talking about an amount of a bit more than 1 billion euros ($1.27 billion)."
Opel's short-term liquidity was secured, he said.
"But we feel required to ensure that in the event of a worst-case scenario, also in the United States, that the further survival of the Adam Opel GmbH is secure," he said.
"A guarantee such as we discussed here could be sensible."
Earlier, GM Europe's top labour leader said acute liquidity problems at the US carmaker meant Opel may never see the more than 1.0 billion euros ($1.3 billion) it is owed by its parent.
The head of Opel's works council, Klaus Franz, told Reuters that Opel had to assume a worst-case scenario, which would be that it could lose this amount should GM be forced to apply for Chapter 11 bankruptcy protection.
Merkel said Opel was a one-off case and that no other industries had asked the government for help.
"No other sectors came here today," she said. "It's a singular case, a link between Opel and GM, and it's a reason for us to be prepared to be able to react to certain situations."
Other German carmakers are suffering, however. Daimler said last month it would shut two big German plants for a month due to a sharp drop in demand.
Volkswagen on Monday reported a 5.1% drop in global vehicle sales in October, and its shares fell 7.43%, underperforming Germany's blue-chip DAX index.
Renault's Chief Operating Officer Patrick Pelata told Le Parisien newspaper he expects the European automobile market to fall by around 20% in 2009.