GM offers Opel workers words instead of freedom

General Motors Co dashed hopes on Tuesday that Opel would play a greater role within its vast empire and only offered vague assurances that Detroit would lengthen the leash on its rebellious European carmaker.

Separately, German Chancellor Angela Merkel warned GM not to count on European governments to bear the brunt of the burden to overhaul Opel, after Detroit refused at the last second to hand control over to a Russian-backed consortium built around Canada's Magna International Inc, triggering an uproar across Germany.

"This solution can only work if GM takes over the lion's share of the restructuring costs, which also means that it has to pay back the bridging loan," she told the lower house of Parliament on Tuesday.

Merkel staked her own reputation on the deal brokered over some six months and greased with billions in state aid from Germany -- ultimately undoing her own efforts after she had engendered too much hostility in other countries, which felt that Berlin was protecting domestic German jobs at the cost of Spain and Britain.

GM claims it can slash 30% of Opel's fixed costs for a third of the price to taxpayers that Magna would have charged; but the fierce backlash and near-total lack of trust in GM's management threatens its hope of raising 3 billion euros (usd 4.49 billion) in state aid to restructure Opel.

Chief Executive Fritz Henderson came to Ruesselsheim on Monday to mend fences, but he offered little in the way of goodies to German unions and politicians, who have demanded greater autonomy from Detroit's headquarters in exchange for their support.

Berlin has indicated that a key condition of state aid is ensuring that funds are spent in Europe on Opel, and have called on GM to provide a water-tight legal separation to prevent any suspicion of a financial leak in the direction of Detroit.

Speaking to reporters on Tuesday, Henderson showed little interest in marketing Opels outside the strict confines of Europe or even elevating the unit's status from a limited liability company to an incorporated stock company as proof that the carmaker would gain a greater measure of self-determination.

"We have a strategy in Brazil around Chevrolet - it's a strong brand; the last thing we usually need is another brand," he cited as an example during a news briefing.

"Opel is a regional brand and I don't see that changing. That doesn't mean I'm closed to ideas about how it can be used elsewhere; but the measure of the Opel brand's success will be Europe, because if you don't win here all the discussion of exports will be irrelevant," he said.

The GM CEO also refuted estimates from the Moody's rating agency that the total funding need for Opel was 8.5 billion euros, well above the USD 6.1 billion a study commissioned by GM's board had estimated.

"I have absolutely no idea where those numbers came from. That's not what we think is required -- we think what's required is about 3 billion euros in total," Henderson said.

Magna's plan required 4.5 billion euros, sparking fears in Europe that GM is more interested in the long-term success of core brands like Chevy at the expense of its European marque.

The GM CEO said he would not starve Opel of investments, factoring into his plans spending levels of over 1 billion euros a year to maintain the brand's current model and engine range. But he characterized that figure as a forecast and not a commitment.

Loan installment paid

The GM CEO refused to answer any questions about the future of individual plants or the distribution of job cuts expected to affect around a fifth of the 50,000 European workers ahead of a restructuring plan that should be finished in the next quarter.

He also deflected fears that next year's expected sharp slump in the European car market, once government-sponsored scrapping incentives are absent, could prove fatal for GM's Opel plans.

Henderson answered that the company would finally now be in a position to build to demand in 2010, since Opel had already slashed production massively to shrink stocks of unsold cars.

"Once we are done reducing our inventory, we will be stable - and we will have that done by the end of this year. So even if the market next year is down, our level of production might very well be up," the GM CEO said.

Opel's senior labor leader Klaus Franz met with Henderson in the morning but failed to extract any meaningful concessions; and the two parted agreeing that the next step is for Detroit to present a comprehensive, financially solid business plan for its European carmaker until 2014.

"We will then decide whether to enter further talks or negotiations," Franz said in a statement.

Earlier, GM said it had paid back another 200 million euros of the 1.5 billion euro bridge loan Germany awarded it to rescue Opel from its U.S. parent's trip through bankruptcy.

"We now have an outstanding balance of 600 million euros. We expect to pay the balance before Nov. 30," GM Europe finance chief Enrico Digirolamo said in a statement.

Magna's partner on the Opel bid, Sberbank, said in St. Petersburg it would not rule out legal action against GM, after it angered the Kremlin by killing the deal.

Russia was counting on Opel to modernize its own obsolete auto industry. Moscow has now invited France's Renault SA to increase its 25 percent stake in carmaker AvtoVAZ.

($1 = 0.6676 euro)