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Opel in need of cash

2009-02-24 14:39

The German government distanced itself on Monday from any commitment to Opel's future, saying it would wait for the ailing carmaker to present a business plan before considering state guarantees.

Opel, the German unit of General Motors, needs some $4.15bn to keep afloat through to the end of 2011, a source at the carmaker told Reuters on Friday.

As industry observers questioned the wisdom of pumping state funds into a struggling company that is burning cash, Economy Minister Karl-Theodor zu Guttenberg said on Monday it was not the state's job to decide how Opel should tackle its future.

"The plan is up to the company. The state can not take charge of this... It is a step that must be taken before the state can come to a basic decision," he told ZDF television.

Asked if Germany would back a plan for Opel to split from its US parent, as GM has said it wants to do with its Nordic unit Saab, Guttenberg said that that also would depend on decisions made by the company.

"It's first off a decision for the group. Does it make sense? Could (Opel), continue and succeed in the market as a separate company? - and that means without continuous state aid," he said.

GM is itself facing mountainous debts and an uncertain future, and loss-making Saab stepped up efforts to find a new partner and raise fresh funds on Friday after it won protection from creditors.

Politicians divided

Politicians in Chancellor Angela Merkel's Christian Democrats were divided over the weekend about how far the government should go to help out Opel, with some saying insolvency looked unavoidable while others - notably in the regions where Opel has a manufacturing presence - favouring state intervention.

Commerzbank raised doubts about the usefulness of state backing.

"An increasing number of politicians reject such intervention due to the uncertain long-term viability of Opel on the one hand, and the risk of an unfair competitive advantage on the other," the bank said in a note published on Monday.

"We believe that it will not be possible to run Opel on a standalone basis."

"If the state helps Opel now, then it will have to help BMW tomorrow, and then Daimler the next day and all the car parts suppliers," Hans-Olaf Henkel, a former president of the German BDI industry federation, had said at the weekend.

Opel has been making cars for over a century in Germany, where it employs some 25,000 people. On Monday, board member Armin Schild was quoted in financial daily Handelsblatt as saying the company would be ready present its plan this Friday.

"We have a board meeting on February 27," he said.

"I take it that we'll be clearly further along by then and ready to present the main features of the new plan."

Read more on:    angela merkel

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