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GM, Chrysler Failure Has Impact On Global Industry

GM and Chrysler’s failure to submit acceptable plans to receive more government money increases the likelihood they will file for bankruptcy, a scenario that worries global automakers.

BERLIN (AP) -- Global automakers reacted with anxiety to news that General Motors and Chrysler had failed to submit acceptable plans to receive more government money, although the ousting of GM CEO Rick Wagoner was welcomed as a promising sign of change.

The failure of the restructuring proposals -- to be officially announced by the White House at 11 a.m. (1500 GMT) -- increases the likelihood that the two companies will file for bankruptcy, a scenario that would shake the wider market and worry governments and workers in several countries.

GM owns Adam Opel GmbH in Germany and Saab in Sweden, while Chrysler has a deal pending with Fiat in Italy. In Asia, Japan's Nissan and Toyota say their critical North American business would be hurt by the collapse of one of the U.S. automakers because they share the same parts suppliers, such as Delphi Corp., Bosch Auto Parts and TRW Automotive.

In Frankfurt, shares of Daimler AG fell nearly 7.8 percent to €19.23 ($25.37) while shares of BMW AG fell nearly 7.7 percent to €21.54. In Tokyo, shares of Toyota fell 3.7 percent, Honda Motor Co. shed 6.7 percent, and Nissan Motor Co. dived 7.7 percent.

"A healthy U.S. auto industry is in the best interests of everyone," said Alan Buddendeck, corporate vice president of global communications at Nissan Motor Co., Japan's third-biggest carmaker.

Despite the gloom, European auto workers and analysts welcomed the departure of GM's Wagoner as a sign that Washington is ready to make tough decisions.

Klaus Franz, the top employee representative at Opel said Wagoner was a symbol of mismanagement.

"Rick Wagoner stands for an imploded centralist system," Franz said. He praised Wagoner's temporary replacement, current president and chief operating officer Fritz Henderson, who has worked closely with GM's European units including Opel.

The move is an optimistic sign for Opel, said Ferdinand Dudenhoeffer, the director of the Center for Automotive Research in Gelsenkirchen.

"For Opel it means a new beginning and a signal for a new start," he told radio station Antenna Bayern, adding that under Wagoner, GM had depended "too long on big, gas-guzzling cars."

State officials in North Rhine-Westphalia, where Opel has a factory, said they hoped the Obama administration's tough line against GM might convince the German government that it is worth saving the European unit.

German Chancellor Angela Merkel, who will visit Opel headquarters in Ruesselsheim near Frankfurt on Tuesday, has said that she will not agree to aid Opel without a tenable recovery plan, partially out of fear that money might flow away to Opel's U.S. owner.

In the plan to be announced Monday, the White House offered GM 60 days of operating money to restructure.

"I believe that the chancellor can tell Opel employees tomorrow that the chances of saving Opel are good," said North Rhine-Westphalia Governor Juergen Ruettgers

Joran Hagglund, a senior official at Sweden's Ministry of Enterprise, said the 60-day deadline for a restructuring plan would probably help GM speed up its sales plans for the Goteborg-based Saab.

"That could mean that GM puts more efforts into really getting to the bottom of (those) interested in buying Saab," he told Swedish news agency TT.

In Chrysler's case, U.S. administration officials have given Chrysler a 30-day window to complete a proposed partnership with Italian automaker Fiat SpA, and will offer up to $6 billion to the companies if they can negotiate a deal before time runs out.

If a Chrysler-Fiat union cannot be completed, Washington plans to walk away, leaving Chrysler destined for a complete sell-off. No other money is available.

Fiat shares dropped nearly 4 percent to €5.05 on the news.

The deal calls for Fiat to get a 35-percent stake in Chrysler in exchange for small car and other technology that Chrysler has valued at €8 billion to €10 billion. Under current terms, Fiat will not put up any cash and will not be responsible for any debt, present or future.

Fiat Group CEO Sergio Marchionne told shareholders last Friday that the deal would benefit both companies, noting that Fiat has the "tools and technology" to help Chrysler survive the current crisis as a well-developed array of small car platforms that Chrysler has acknowledged it lacks.

Both automakers also gain a foothold in the other's markets. Fiat has been keen to launch its wildly successful update of the iconic 500 in the United States, as well as Alfa Romeo models.

Fiat spokesmen were not immediately available for comment.

AP Business Writer Yuri Kageyma reported from Tokyo. AP Business Writers Colleen Barry in Milan, Italy, Louise Nordstrom in Stockholm and Associated Press Researcher Ji Chen contributed to this report.

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