Fiat pulls out of Opel talks over funding demands, asserts not withdrawing bid

29 May 2009

A top-level meeting on a rescue plan for troubled carmaker Opel was in jeopardy following the Italian carmaker Fiat pulling out over a dispute on financing, according a spokesman for Germany's Chancellor Angela Merkel.

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

He added however that a meeting with the chancellor, GM, Opel, US treasury and bidder representatives could only take place if "those involved ... have something substantial to produce, contracts that carry their signatures."

Steg said the government expected a letter of intent and to what extent those involved could produce this he could not say.

The German government is interested in an agreement that will shield Opel with 25,000 employees in Germany from a looming GM bankruptcy court filing and extensive restructuring. The developments in US have placed jobs in Germany at risk.  The government is therefore looking to make Opel legally independent under a trustee and then provide  bridge financing while Opel looks for a new permanent owner.

Italy's Fiat Group SpA and Canadian auto parts maker Magna are in competition for Opel as the German government looks to minimise job losses and expense to German taxpayers. GM and the US Treasury Department are also part of the negotiations.