Fiat pulls out of Opel talks with German government over funding

May 29, 2009 at 1:01 pm

(Source: Times Online, UK)

Fiat has pulled out of talks with the German Government about Opel, blaming “unreasonable” funding demands, but emphasised that it was not withdrawing its bid for General Motors’ European unit, which owns Opel and Vauxhall.

Sergio Marchionne, Fiat’s chief executive, said that Germany had asked his car group to provide emergency funds for Opel, which would expose it to “extravagant risks”.

Mr Marchionne said “The last round of requests which would require Fiat, among other things, to fund Opel on an emergency basis while the German Government determines the exact timing and conditions of interim financing, would expose Fiat to unnecessary and unwarranted risks.”

Mr Marchionne said that he had not been granted full access to Opel’s financial records and so it was unreasonable to ask Fiat to provide emergency funds. Because today’s meeting will focus specifically on Opel, Fiat would not be attending, he said. However, he said that Fiat remained interested in a potential deal with GM.

“We remain committed to finding ways to bridge the expectations of both General Motors and the German Government, but the emergency nature of the situation cannot put Fiat in a position to take extravagant risks,” he said.

Gareth Thomas, the Trade Minister, will attend the emergency talks in Brussels today. A Commission spokeswoman said: “The aim of the meeting is to exchange information and ensure a level playing field for co-ordination.”

GM is heading for what would be the biggest bankruptcy by an American industrial company after bondholders owning about 20 per cent of its $27.2 billion (£17 billion) unsecured debt agreed to accept a 10 per cent stake in a restructured company and warrants to buy a further 15 per cent in return for forgiving its debt.

A news report from Reuters indicates that top ministers from the German government will meet in Berlin to discuss the future of the Opel unit of General Motors (GM.N) on Friday but no U.S. government officials or representatives from GM will join in, a German government official said on Friday.

Potential bidders Magna and Fiat will not participate in the meeting either, said the official who requested anonymity.