German rift opens over Opel sale

A rift opened up at the top of the German government on Friday over the state-sponsored sale of Opel, just as Berlin haggled with other European governments over their financial contributions for the deal.

The Financial Times has learnt that a dispute has broken out between the office of Angela Merkel, the German chancellor, and the economics ministry over the protracted negotiations to secure financial support for the deal from the UK, Spain and Belgium.

The German government brokered the agreement to sell a 55 per cent stake in Opel-Vauxhall, the European operations of General Motors of the US, to Magna International. But success hinges on securing €4.5bn ($6.6m) in state-backed loans and credit guarantees, mostly provided by Berlin, but topped up with contributions from the other European countries

The chancellery is understood to be unhappy about the way Jochen Homann, deputy economics minister, has conducted the talks. Tensions over the deal have been simmering since Karl-Theodor zu Guttenberg, the German economics minister, rejected the Magna deal earlier this year, only to be overruled by Ms Merkel.

The German government rift surfaced after talks between European government officials in Berlin, and between the unions and Magna ended without resolution, threatening to delay next week’s planned signing of the deal.

Berlin has faced mounting resistance to the deal from Spain, the UK and Belgium, which are concerned they are bearing a higher proportion of the 10,500 planned job cuts. Germany is home to 50 per cent of the Opel workforce of 50,000 but internal documents show it has some of the least efficient plants.

After meeting Siegfried Wolf, Magna’s co-chief executive, on Friday, Miguel Sebastián, Spain’s industry minister, reaffirmed his scepticism about the deal. He said Magna, which plans further talks in Madrid next Tuesday, had not been able to convince him of its industrial concept for Opel.

Mr Sebastián insisted that the Spanish Opel plant in Zaragoza should not lose any of its capacity to less or equally productive plants in Germany. Magna plans to shift one production line from the Figueruelas factory, which employs around 7,500 and is among Opel’s most efficient plants, to Eisenach in Germany.

Sources close to the German government said Spain was insisting on a guarantee for the plant, which they said could conflict with European state aid rules.

Another round of talks in the UK between the government, the unions and Magna also failed to come to an agreement on Friday. “We have not yet reached a conclusion which is acceptable to either the union or the government,” a UK government spokesman said. But British government officials indicated they thought there could be a resolution next week after “good progress” was made in the past few days.

The unions want Magna to commit to producing 150,000 vehicles per year at the Ellesmere Port plant in north-west England, 20 per cent more than foreseen under its plan. The unions claim this could halve the planned 830 job losses.

There were further signs of political unease in Germany over the deal on Friday when Rainer Brüderle, one of the senior members of the Free Democratic Party, which is the future junior coalition party of Ms Merkel’s Christian Democratic Union party, expressed concern about the deal.

“My fears are gradually being realised that nothing has been properly worked out on this,” he said.

Reporting by Bertrand Benoit in Berlin, Daniel Schäfer in Frankfurt, John Reed in London and Jean Eaglesham in Manchester

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