Fiat Could Rescue Opel But Germany Cautious

Germany’s hesitance to provide financing remains a key hurdle for Fiat’s bid to take over Opel, which along with an alliance with Chrysler would create a new European auto giant.

BERLIN (AP) -- Jobs are at stake, and it's an election year. But Germany's government is holding firm in its resolve: no cash to keep GM's Europe business going as part of a takeover by Italy's Fiat.

Instead, Chancellor Angela Merkel's government is waiting for more information on the financial condition of GM's Adam Opel GmbH subsidiary from the U.S. parent company.

Guttenberg's spokesman Steffen Moritz underlined Wednesday that the Economy Ministry was still waiting for detailed figures from GM.

"Afterward, I expect there will be a meeting of all the GM Europe countries to discuss finances," Moritz said. GM also has plants in Poland, Belgium, Austria, Spain and Great Britain.

German caution among government officials as well as left-wing parties and unions remains a key hurdle for Fiat Group CEO Sergio Marchionne and his bid to take over Opel, which along with an alliance with Chrysler would create a new European auto giant.

The biggest question to be answered is how much money Fiat and Opel would need to complete a deal, an amount the government has said it could help raise by offering loan guarantees if it gets a solid plan for the company's future.

Following Monday's meeting with Marchionne, German Finance Minister Karl-Theodor zu Guttenberg said the current estimate for all of GM Europe is between euro5-7 billion -- a much larger sum than the euro3.3 billion ($4.4 billion) needed for Opel that company officials named in March. A Fiat spokesman in Turin, Italy would not comment on figures.

Guttenberg stressed Monday that the financial burden of any state help in a possible deal would have to be shared out among European countries. He said the Fiat approach was "interesting" but would need to be evaluated carefully.

"It is important at the moment not to put off possible investors at the moment with precommitments, but to listen to all of them, (and) to make clear again that certain basic decisions still have to be made among those involved -- and we have no statement from General Motors in Detroit so far as to whether the concept meets with its interest," he said.

Any German financing would also require the participation and the approval of the governors of the four states that host Opel factories, bringing into play the touchy issue of job security.

With Germany facing an election year and every party eager to be seen as preventing job losses, the pressure is here to find an option that keeps the factories running. Conservative Merkel's chief challenger is Frank-Walter Steinmeier, member of the union-allied Social Democratic Party which is trying to keep its supporters from drifting away to ex-communist Left Party.

Christian Aust, an autos analyst with UniCredit in Munich said the German government will try to save as many jobs as possible but doesn't see the government budging from its insistence on guarantees but no hard cash or direct investment.

"So far the German Chancellor has said Opel should remain without involvement from the government. I don't expect direct government help," he told The Associated Press.

Aust said Fiat's need for bridge loans from private banks of between euro5 billion and euro7 billion would need government backing, especially as Fiat has its own debt load of around euro6 billion.

"To be honest, I don't know what decision the government will take," Aust said. "GM is looking for cash and preventing any cash outflow," indicating in a sense, that Opel's in a buyers market, if the financing can be arranged.

Guttenberg indicated after meeting Marchionne on Monday that the future of an engine plant in Kaiserslautern was unclear -- which irked that region's center-left state government.

Marchionne was later quoted as saying by the Bild daily that Fiat doesn't want to close any of Opel's four German plants, leaving it unclear whether he had changed his mind after the talks.

Magna, the other strong partner in the running, has yet to provide its detailed concept for Opel, although it is expected within a week. The Austrian-Canadian company has said it could envision taking a minority stake in Opel

Bernstein analyst Max Warburton notes that despite the union opposition to the Fiat-Opel deal, the government could find itself in a tough position.

"Without an industrial savior like Fiat, the German government will be left funding Opel and desperately trying to figure out an exit strategy," Warburton wrote in an analysis of the deal.

Warburton further calculated the alliance would generate euro1.5 billion in synergies -- compared with just euro225 million for Chrysler -- due to shared product development and shared purchasing on identical platforms.

Opel and Fiat already share a small car platform used in Fiat's Punto and Opel's Corsa, as well as Alfa Romeo's Mito, which was developed in the 2000-2004 period when GM held a 20 percent stake in Fiat.

"The massive overlap with Opel ... would yield savings of around euro1.5 billion -- before any discussion about plant closures or job cuts," he wrote.

Together, Fiat and Opel would jump from 4th and 6th in Europe to a combined No. 2 with a 16 percent market share, behind only Volkswagen, Warburton said.

He suggests that Fiat could concentrate on small cars (A and B segment) while Opel goes for the larger C-segment and D-segment cars -- filling Russelsheim with the Alfa 159 and its successor, the 149.

AP Business Writers Colleen Barry in Milan, Italy and George Frey in Frankfurt contributed to this report.

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