EU Official: Help For GM Unit 'Justified'

European Union's industry chief said 'extraordinary measures' are justified to keep car maker Adam Opel GmbH in business and shore up the entire car industry.

STRASBOURG, France (AP) -- The European Union's industry chief said Wednesday that "extraordinary measures" are justified to keep carmaker Adam Opel GmbH in business and shore up the entire car industry, blaming problems on U.S. car companies and the U.S.-spawned financial crisis.

EU Industry Commissioner Guenter Verheugen warned that the collapse of General Motors Corp.'s German-based Opel carmaker could trigger a domino effect that could bring down other car companies in an industry that directly employs some 12 million people.

"We are going to do all we possibly can to help," he told the European Parliament. "If one big carmaker disappears from the market, there will be a knock-on effect all down the line."

European carmakers are calling for EU governments to follow the U.S. and give them billions of euros (dollars) in soft loans as sales slump and they face new rules forcing them to reduce greenhouse gas emissions from cars.

Verheugen is one of many voicing support for a European multibillion euro (dollar) bailout for the industry but the final decision rests with EU governments who are looking into a loan package likely to fall short of the euro40 billion (US$51 billion) the industry wants.

Germany is considering giving Opel euro1 billion ($1.25 billion) in state guarantees for loans that would reduce its borrowing costs while EU regulators are encouraging eco-friendly tax incentives to encourage buyers to pick less polluting vehicles.

German solar energy company SolarWorld AG said it plans to offer euro1 billion ($1.3 billion) in cash and credit for some assets of Opel but GM responded that it was not selling.

Bonn-based SolarWorld said it was planning to offer GM euro250 million ($350 million) in cash and another euro750 million ($945 million) in credit lines in a bid for four German facilities, development center and headquarters, to make it Europe's first true "green" auto company.

Such news did not brighten the industry's dark outlook.

Verheugen said next year would be a "crisis year" for the car industry that would also affect jobs in other industries that supply car makers. One million fewer cars, vans, trucks and buses may be turned out, he said.

Opel was not to blame for its troubles which have "arisen solely from the credit crunch in America", he said, describing Opel as a competitive and innovative business that fell victim to the errors of its U.S. parent General Motors. GM is seeking federal help and says it is running out of cash.

"I want to be unequivocal on this: it is the parent company in the United States that has made the mistakes," he said.

He also blamed the financial crisis that originated in the United States for the downturn that has cut car sales and hiked the cost of credit.

France has also backed a car sector bailout but EU regulators are more skeptical, warning that subsidizing one industry would damage fair competition and hurt the economy.

Carmakers say they generate almost euro400 billion in tax revenue for governments every year.

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