Germany warns on state aid ahead of Opel talks

ERJ staff report (ANE)

Berlin (Reuters) -- The German government is ready to talk with troubled carmaker Opel, but will not offer blanket aid to entire industries suffering due to the financial crisis, Finance Minister Peer Steinbrueck said.

Opel, a unit of U.S. automaker General Motors, has asked the federal government and German states to help it weather a financial rough patch that has been aggravated by the troubles of its parent company. Chancellor Angela Merkel is due to meet with Opel representatives on Monday afternoon. Officials from the Finance Ministry, Economy Ministry and German states will hold talks on Tuesday to discuss the broader woes in the auto sector.

"There are tens of thousands of jobs, directly and indirectly, linked to Opel. No politician can remain indifferent is such a situation," Steinbrueck told the Leipziger Volkszeitung daily.

"But we cannot have crisis free-loaders. I can only warn managers against thinking they can take advantage of the current situation to get something from the government they would not have otherwise received," he added.

"Those who are responsible for their own problems shouldn't come to the state for cures. This simply won't work with the German government."

His comments were echoed by Economy Minister Michael Glos, who voiced his opposition to a rescue package for the entire German auto sector, saying it was not the state's role to step in when consumer demand waned.

"I see the danger that one sector after another will come to us," he told the Frankfurter Allgemeine Sonntagszeitung.

The financial crisis has severely hit demand for new automobiles, a major worry in Germany where close to one in five workers is employed, directly or indirectly, in the sector.

U.S. firms like GM have been particularly hard hit. Opel's parent firm has said it could run out of cash by early next year. U.S. president-elect Barack Obama has urged a government rescue for domestic carmakers.

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.

Roland Koch, the caretaker premier of the western state of Hesse where Opel has big operations, has said the carmaker needs guarantees of roughly 1 billion euros -- a figure confirmed by a source within the company.

He has suggested that two thirds of that figure be provided by the federal government and the remainder by the four states where Opel has its factories.

Klaus Franz, deputy head of Opel's supervisory board, has said the company will need the state guarantees only if GM fails to repay billions of euros it owes Opel and which the German firm needs for investments in new models.

German Finance Minister Steinbrueck said the government had asked Opel to supply details on its financial situation ahead of this week's meetings. He conceded the government might have to step in to help parts of the economy, both this year and next, to "prevent worse damage to our country".

But he said the government's generosity had its limits.

"We can't suddenly come up with packages for a whole range of industries," he said.

From Automotive News Europe (A Crain publication)