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Deal struck to save Opel
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08:08, May 31, 2009

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The 25,000 employees of German carmaker Opel can breathe a sigh of relief: The German federal government, Opel's parent company General Motors (GM), Canadian auto parts maker Magna and the U.S. Ministry of Finance struck a deal early on Saturday to save the company after over-night marathon talks at German Chancellor Angela Merkel's office.

Finance Minister Peer Steinbrueck and Economy Minister Karl-Theodor zu Guttenberg told journalists shortly after 2 a.m. (0100 GMT) that a deal had been struck.

"I can tell you that a deal has been reached," Steinbrueck said.

The agreement includes three main points: The German government approves Magna's takeover of Opel, Opel will be put under the care of a trustee, and the German government will provide a 1.5-billion-euro (2.1 billion-U.S. dollar) bridging loan to Opel.

A visitor views an Opel car at the exhibition hall of Opel auto in Berlin, Germany, May 30, 2009. A deal has been reached for the Canadian auto parts maker Magna to take over General Motor's Opel. (Xinhua/Luo Huanhuan)

The German government had been pursuing ways to prevent Opel from being dragged into bankruptcy by its owner GM, which is expected to seek bankruptcy protection early next week.

As early as last year, Opel had requested a bridging loan from the German government, but was denied.

The government, in a bid to save jobs at Opel, had held frequent talks with GM and the U.S. government, and Steinbrueck himself had flown to the United States to seek solutions.

The over-night talks were the second this week between key government ministers, GM and Magna after the Italian auto giant Fiat withdrew its bid for Opel on Friday.

State premier of Hesse Roland Koch (2nd L), German Economy Minister Karl-Theodor zu Guttenberg (C) and German Finance Minister Peer Steinbrueck (3rd R) address the media after talks in Berlin May 30, 2009. Germany reached a deal in talks with Canada's Magna, General Motors (GM) and governments to save Opel, German government leaders said on Saturday after a marathon six-hour meeting in the chancellery.(Xinhua/Reuters Photo)

Fiat complained it faced "unreasonable" funding demands from the German government.

"You can be sure that we have reached a decision which was not easy," Steinbrueck said.

"All participants were aware of the risks, but these risks were also weighed against the risks... in the event of Opel's bankruptcy, and what the consequences would be," Steinbrueck said.

GM had sought more money while Berlin was looking for assurances that taxpayer money invested in Opel would remain in Germany.

Steinbrueck said there would be no additional financing from the federal government in Berlin, even with parliamentary elections looming.

The government is eager to show it will not be subject to "extortion," he said.

Siegfried Wolf, a co-CEO of Magna, said he believed the agreement with GM will be signed in five weeks' time, despite the fact that there were still some more details to be settled.

Germany-based Opel was founded in 1863, and it began making automobiles in 1899. During the Great Depression in 1929, Opel was acquired by GM.

GM Europe, which includes the Opel unit, employs a total of 55,000 people.

Nearly half are employed in Germany at Opel plants in Bochum, Eisenach, Ruesselsheim and Kaiserslautern.

Magna, which has 70,000 employees at 326 plants in 25 countries and supplies components and systems to many of the world's leading carmakers, wants to use Opel to enter the Russian market.

Two people walk past an exhibition hall of Opel auto in Berlin, Germany, May 30, 2009. A deal has been reached for the Canadian auto parts maker Magna to take over General Motor's Opel. (Xinhua/Luo Huanhuan)

German Vice-Chancellor and Foreign Minister Frank-Walter Stein Meier, who is the main rival of Merkel in the upcoming general elections in September, said he was satisfied with the deal.

"Nobody can exclude all risks in the future, but I think we have really a responsible solution," he said.

Juergen Ruettgers, Prime Minister of North Rhine-Westphalia, where Opel's Bochum factory is located, described the agreement as a viable solution.

GM Europe chief Carl-Peter Forster said Opel has been rescued.

"This is the beginning of a new future for Opel, the staff and the brand," he said.

Fiat, meanwhile, has now turned its attentions to a deal with Chrysler and is awaiting a U.S. court's decision. Fiat is looking for a 20 percent stake in Chrysler.

Source: Xinhua

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