Fiat says it won't attend Opel talks

[May 29, 2009]  BERLIN (AP) -- A top-level meeting on a rescue plan for carmaker Opel was in jeopardy after Italy's Fiat, one of two remaining bidders for the General Motors Corp. unit, said it would not attend in a dispute over financing, a spokesman for Chancellor Angela Merkel said Friday.

With rival bidder Magna International Inc. in talks with GM, Merkel spokesman Thomas Steg said lower-level German government officials still planned to meet to review the state of negotiations.

But he said a high-level meeting with the chancellor, GM, Opel, U.S. Treasury and bidder representatives would only happen if "those involved ... have something substantial to produce, contracts that carry their signatures."

"We expect a letter of intent," Steg said. "To what extent those involved are far enough along to produce this, I can't say."

Germany is looking for an agreement that will shield Opel -- which employs 25,000 people in Germany - from a looming GM bankruptcy court filing and extensive restructuring. The government wants to make it legally independent under a trustee, then provide bridge financing while Opel looks for a new, permanent owner.

The German government, which is seeking to minimize job losses and expense to German taxpayers, has been negotiating with two suitors - Italy's Fiat Group SpA and Canadian auto parts maker Magna, which submitted a bid along with Russian lender Sberbank. GM and the U.S. Treasury Department are also part of the negotiations.

But Fiat CEO Sergio Marchionne said Friday morning that his company would not be attending Friday's talks, saying the company faced "unreasonable" funding demands. He stressed, however, that Fiat was not withdrawing its bid for Opel.

Marathon talks through Wednesday night with both Fiat and Magna led by Chancellor Angela Merkel failed to produce an agreement on Opel's future. They were to reconvene Friday.

German officials blamed short-term financing needs they said were brought up by GM totaling euro300 million ($418 million) for preventing a decision earlier this week. The government has offered euro1.5 billion in bridge financing.

Asked if she could rule out an Opel bankruptcy filing, Merkel was quoted as telling the weekly Der Spiegel that "we are doing everything to find a different solution. But a direct state holding in Opel does not come into question for me."

While Magna has indicated it would be willing to provide the additional funding, Marchionne said Fiat had decided to pull out of the continuation of the talks Friday because of the requirement for the emergency funds

Marchionne said it was "unreasonable" to expect Fiat to provide such funding because it had not yet had full access to Opel's financial records and could not determine "its precise financial condition and thus properly frame a merger proposal that would be fair" to both sides.

"The emergency nature of the situation cannot put Fiat in a position to take on extravagant risks. We have already offered to contribute our auto business assets to the merger on a debt-free basis and thus provide substantial ... equity to the merger."

Taking over GM's European operations, including Opel and Britain's Vauxhall, is a key part of Marchionne's strategy of creating a car company with the capacity to produce 6 million cars a year, the threshold he says is necessary for an automaker to survive. Fiat is on the verge of taking control of a 20 percent stake in Chrysler, pending the completion of restructuring in bankruptcy court in New York.

Thuringia governor Dieter Althaus, whose state is home to a major Opel plant, said he was surprised by Fiat's decision, but suggested the talks could carry on without them.

"For us this doesn't change the basis for the talks," he told Bayerischer Rundfunk radio.

Althaus, along with the governors of three other states with Opel plants, are part of the talks on the German side, along with Merkel and several of her ministers.

"From the view of the states Magna's concept is comprehensive and I'm happy that Magna is negotiating with us today. Where I thought that Fiat could also present a suitable concept, now we will negotiate further between Magna and GM."

Separate to the Berlin talks, the European Commission was hosting talks among ministers to coordinate government efforts to save GM's European operations.

Opel and sister brand Vauxhall also have operations in Belgium, Spain and Poland among other countries. GM officials will not be present.

[Associated Press; By DAVID RISING]

AP Business Writer Colleen Barry in Milan contributed to this report.

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