UPDATE 2-Germany rules against aid for GM’s Opel, for now

* Econ Min decides after stalemate at state rescue fund

* Merkel says her minister’s decision is not the last word

* Opel reviews all funding options, liquidity secure for now

(Rewrites throughout adding comments from Merkel, Opel CEO)

By Christiaan Hetzner and Andreas Rinke

FRANKFURT/BERLIN, June 9 (BestGrowthStock) – Germany dashed Opel’s
hopes of receiving state aid on Monday, at least initially, in a
ruling the carmaker believes was motivated by sovereign debt
crisis rather than anger over perceived sins committed by its
Detroit parent.

General Motors [GM.UL] may now be forced to contribute more
than the planned 1.9 billion euros ($2.55 billion) of U.S.
taxpayer funding to keep Opel afloat as the loss-making European
brand slashes 20 percent of its capacity and rejuvenates the
bulk of its model range through the end of 2014.

“GM is naturally very disappointed with this decision as is
Opel after such a very long process. We’ve spent a long time
answering many, many hundreds of questions being reviewed by
many, many different committees,” Opel Chief Executive Nick
Reilly told reporters on Wednesday

“I don’t particularly understand the reasons why,” he
continued, adding he would now discuss with parent GM about
possible funding options.

The decision to reject Opel’s request for Germany to
backstop 1.1 billion euros ($1.5 billion) of its borrowing
revealed further cracks in Chancellor Angela Merkel’s porous and
largely unpopular centre-right coalition with the liberal Free
Democrats (FDP).

Some 48 hours after Berlin unveiled an 11.2 billion euro
fiscal savings programme, German Economics Minister Rainer
Bruederle of the junior partner FDP took personal responsibility
after a Monday stalemate within the German rescue fund,
rejecting state guarantees for private-sector loans to Opel that
he had opposed ever since taking office. [ID:nLDE6561E9]

Merkel, known as a pragmatic middle-of-the road
conservative, said the “last word had not been spoken” over Opel
and that she would “do everything” she could to ensure support
to Opel’s 25,000-strong German workforce.

Nonetheless, this decision would strengthen Bruederle’s
credentials as a politician who fights against state
intervention while Merkel would preserve her reputation as the
protective mother of the nation.


GM last November unceremoniously junked Merkel’s
painstakingly brokered sale of a majority stake in Opel to her
preferred bidder, Canadian auto parts supplier Magna (MGa.TO: ),
which she was prepared to finance with 4.5 billion euros in
German state loan guarantees.

Reilly dismissed speculation that Berlin’s decision was the
penalty GM had to pay politically for its last-minute backout.

“Had this decision been made at the end of last year or
beginning of this year, the climate was different and I think
the answer might have been different,” the Opel CEO explained.

“But now we’ve been caught up in the current economic and
political difficulties that obviously are in the country. I
think that has changed the climate for the decision quite
signficantly … so I would not call this retribution.”

Reilly said that he did not anticipate running into any
dramatic liquidity problems for the remainder of the year, a
signal that insolvency is at least not an immediate risk.

Going forward, Opel expects to submit all new applications
for guarantees at a regional level with four state governments
in Germany that Reilly believes would likely contribute between
25 and 50 percent of the 1.1 billion euros required.

He added that other state aid programmes outside of the
German rescue fund still existed as options, but conceded that
were these in fact an easier route, Opel would have already
tapped the facilities.

The state premieres of Hesse, North-Rhine Westphalia,
Thueringia and Rheinland-Palatinate are due to meet with Merkel
on Thursday to discuss how Germany can still provide support.
($1=.7453 Euro)

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(Reporting by Christiaan Hetzner; Editing by Hans Peters)

UPDATE 2-Germany rules against aid for GM’s Opel, for now