Germany weighs $2.6 billion bail-out for Opel

18 November 2008

German federal and state governments are working on a $2.6 billion (two billion euro) bailout package for ailing carmker Opel, a subsidiary of General Motors Corporation of the US.
 
Opel sought government help after its management was left with no cash to run the company.

Germany, which is confirmed to be in a recession, said it wants to help Opal, General Motors' struggling German subsidiary, but the aid will be limited to the German company and the government wants to make sure it does not percolate over to Opel's US parent or lead to demands for support from other companies.

Countries across the world, in a quandary over the prospect of large scale job losses, which could worsen the economic scenario and deepen an already bad recession, are planning to help auto companies badly hit by falling demand.

Opel, which sought aid from the federal and state governments, says its troubles have been compounded by the problems at its parent company in the US.  Opal wants the German government to guarantees to finance its development and assembly facilities if its parent company stops supplying cash. The German subsidiary needs more than 1 billion euros ($1.27 billion) to survive, according to GM Europe chief Carl-Peter Forster.

Opel's parent GM said earlier this month that its cash holdings would fall short of the minimum needed to run its business without new funding or other drastic action.

German chancellor Angela Merkel, speaking at a news conference after meeting Opel executives, said a decision on whether the carmaker would need a guarantee from the federal government and German states should be made by Christmas this year.