Saturday, May 30, 2009

Obama 'helped' Opel rescue deal

German Chancellor Angela Merkel has revealed the US president helped swing a deal to save carmaker Opel from the imminent bankruptcy of its parent firm.

She said Barack Obama helped clear some hurdles threatening the transaction during a phone conversation.

Earlier, Germany agreed the deal with Magna International, a Canadian car parts maker, to take over Opel, part of the European wing of US carmaker GM.

It should protect Opel if GM files for bankruptcy protection in the US.

GM is expected to do this as early as Monday.

Marathon talks

"I spoke on the phone with the American president yesterday [Friday] and we were in agreement that we had to do everything possible to come up with a good results for this complicated task," Mrs Merkel told reporters in Berlin.

"That conversation clearly influenced the negotiations last night," she said, adding that Mr Obama helped clear some hurdles over the financing of the rescue deal.

The deal was announced early on Saturday by German Finance Minister Peer Steinbrueck, following marathon talks between German politicians, US government officials and executives from General Motors and Magna.

"A solution has been found to keep Opel running," Mr Steinbrueck said.

He said that although it was impossible to exclude all risk, the deal agreed would safeguard Opel's sites in Germany and preserve "the highest possible numbers of jobs" there.

Berlin is expected to provide an immediate loan facility of 1.5bn euros ($2.1bn, £1.3bn).

The Canadian company has said it will put more than 500m euros ($700m; £435m) into Opel, which employs more than 25,000 people in Germany.

Significant numbers of workers are also spread around Spain, Belgium, Poland and the UK, where Opel cars are branded as Vauxhall for British customers.

Magna's bid was backed by Russia's state-run bank Sberbank and Russian magnate Oleg Deripaska's truck firm Gaz. The consortium hopes to see GM expand its reach into the Russian market.

Before the announcement of the deal, Magna said it planned to cut 2,500 jobs in Germany, about 10% of Opel's workforce in that country. Italy's Fiat, a former potential bidder, had said it would cut 10,000 jobs.

GM operations in Europe will now be placed under the care of a trustee to shield them from the parent company's filing for bankruptcy protection in the US.

Magna's plans

Details of the final deal with Magna have not yet been released, but the terms of the agreement are thought to involve GM keeping a 35% stake in the company, while 10% would be owned by Opel employees.

UK Business Secretary Lord Mandelson said Magna had given a "clear commitment" to continuing production of cars in the UK.

But, he said, it was likely that change lay ahead, as there was "excess capacity" in GM's operations in Europe.

On Friday, a court in Sweden granted Saab, GM's other European business, an extension to its protection from creditors.

The Swedish carmaker first sought protection in February. It now has until 20 August to line up a new owner and to restructure its business.

Saab is being sold off by GM separately.

GM 'lifeline'

In the US, General Motors executives on Friday successfully agreed a major cost-saving deal with workers in an effort to pave the way for a major restructuring of its US-based business.

Three-quarters of all United Auto Workers (UAW) union members voted to accept a freeze on pay and an end to bonuses - cutting labour costs by up to $2bn a year, the union said.

It also agreed to cut health benefits to retired employees.

Instead of the company funding health care costs for former workers, the union health trust will do so. The union will take an ownership stake in return for absolving GM of its responsibilities.

The UAW also agreed not to strike until 2015 in a bid to shore up the company and save jobs.

Despite the concessions, 21,000 jobs are expected to be lost and several plants will be closed in the US.

"We've given a lifeline to GM until they can rebound," said Ron Gettelfinger, UAW president.

By 1 June, ownership of the US based business is expected to be shared between the US government (72.5%), the union's health trust (17.5%) and GM's former creditors.

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