Opel's German aid may break rules

The European Commission has warned that Germany's planned state aid
for Opel may breach competition rules, raising the prospect of its
sale being halted. Brussels said there were "significant indications"
Berlin pledged the 4.5 bn euro ($6.7 bn; £4 bn) aid only if its
preferred buyer for Opel was chosen. US firm General Motors (GM) said
last month it would sell Opel to Canada's Magna, Berlin's preferred
buyer. The Commission said GM should now be allowed to reconsider the
sale. Although GM picked Magna and its Russian backer Sherbank last
month to buy Opel and Opel's UK brand Vauxhall, the deal has yet to
be concluded. Neither the German government nor Magna has yet given
any reaction to the Commission's comments. The UK's Department for
Business, Innovation & Skills also declined to comment. However,
Chris Preuss, GM's global vice- president for communications, said
that if the proposed sale to Magna "couldn't pass EU regulations,
we'd have no recourse but to reconsider the deal". "Right now though
we are working on a defined agreement with Magna and it's a
complicated process with a lot of dialogue," he added. "There are a
lot of discussions going on at the moment, and there's a lot of
detail to be ironed out between the German government and the EU."
'Concerns' The Commission said that the concerns were raised by EU
Competition Commissioner Neelie Kroes in a letter to German Economy
Minister Karl Theodor zu Guttenberg. ANALYSIS BBC business reporter
Joe Lynam The comments by Neelie Kroes will be a major potential
irritant for the freshly re-elected German government of Angela
Merkel. A few weeks after confirming Magna as the buyer of
Opel/Vauxhall, the Commission looks as if it may insist that the
bidding be re-opened. This is due to what it sees as bias on the part
of the Berlin government in favour of Magna and against all other
bidders. Having already dragged on for months, the trauma of not
knowing who will buy Opel/ Vauxhall will continue for the thousands of
workers anxious to find out who their new bosses will be. Many of
whom will certainly lose their jobs at the end of this process either
way. It also throws up the prospect of a very powerful face-off
between the all-powerful EU Commission and the all-conquering German
car industry and its friends in Berlin. It said that in the letter
she pointed to " significant indications that aid promised by German
government to New Opel was subject to the precondition that a specific
bidder, Magna/ Sberbank, was selected". The Commission added that Ms
Kroes "indicated that such a precondition for the aid would be
incompatible with... state aid and internal market rules".
"Commissioner Kroes explained that GM and the Opel Trust should be
given the opportunity to reconsider the outcome of the bidding
process on the basis of firm written assurances by the German
authorities that the aid would be available, irrespective of the
choice of investor or plan," said the Commission. Magna, a car parts
firm, and its Russian backer Sherbank, were chosen by GM ahead of
Belgian investment fund RHJ, Italy's Fiat, and China's Beijing
Automotive Industry Holding. Independent car industry analyst Robin
Roberts said it would be very interesting to see how the story now
developed. "Everybody is aware of the rules surrounding European aid,
and anyone - be that a company or a country - that contravenes those
rules can expect to have problems and face the consequences," he
said. Other government fears Both the Belgian and Spanish governments
said last month that they wanted the Commission to study Germany's
role in the sale of Opel. Magna's proposed deal with GM will see it
take a 55 % stake in Opel, with GM keeping 35 % and 10 % going to
employees. Opel currently employs about 50 ,000 people across
Europe, including 5 ,500 at its Vauxhall business in the UK, and 25
,000 in Germany. Magna is proposing 10 ,500 job cuts in total at
Opel, including 4 ,500 in Germany. However, it has indicated that it
wishes to keep open all four of Opel's German plants, while a
factory in Belgium is said to be at risk of closure. Despite Magna
being yet to conclude its takeover of Opel, earlier this week it
secured an agreement with the UK union Unite over job cuts at among
the 5 ,500 workers at the two Vauxhall plants in Ellesmere Port and
Luton. Magna has agreed to limited job loses to 600 people, and only
through voluntary redundancy.