Germans Turn Doubtful on Fiat’s Plans for Opel

Even as Sergio Marchionne, the chief executive of Fiat, is considered a potential savior for Chrysler in the United States, German politicians, executives and union bosses are casting a more skeptical eye on his bid for Opel and the rest of General Motors’ European operations.

AP Opel Factory

Securing large swaths of G.M’s overseas empire with financial help from the German government would be an important step in Mr. Marchionne’s bid to create a global automotive giant without using his company’s own cash.

In Germany, the need to keep Opel and its 25,000 jobs secure has emerged as a major political issue ahead of the country’s general elections in September.

Fresh from his success in securing a 20 percent stake in Chrysler, as well as billions in fresh financing from Washington for the now-bankrupt automaker, Mr. Marchionne headed to Germany last week in search of a similar deal for Opel and the rest of G.M.’s European operations.

German leaders, as well as Fiat and G.M. executives, are trying to reach a deal before June 1, the deadline set by the White House for G.M. to reach an agreement with lenders and unions to avoid bankruptcy. But German government officials and labor leaders remain more wary of Mr. Marchionne than their American counterparts.

Mr. Marchionne is seeking up to 7 billion euros in financial aid to help get Opel through the current sales drought, reorganize its manufacturing operations and trim its work force, all expensive propositions on the Continent, where auto sales have plunged and union and government rules make job cuts difficult.

But union representatives and government officials said they came away unconvinced from meetings with Fiat, adding that the plan, called Project Phoenix, did not have enough details to satisfy them, despite Mr. Marchionne’s promises to keep job cuts and plant closures in Germany to a minimum.

“I have more questions than answers, and the answers are not convincing,” said Klaus Franz, the top union official at Opel and vice chairman of the company’s supervisory board. “I won’t absolutely refuse it in these circumstances, but I think this is a concept to save Fiat, not Opel or G.M. in Europe.” A Fiat spokesman declined to comment on Project Phoenix or the negotiations in Germany.

On Monday, Fritz Henderson, chief executive of G.M., said it was looking to the German government to finance its European operations, whether a deal is made to sell Fiat or not. “We have a need for funding in our European operations that is important and urgent,” Mr. Henderson said in a conference call with reporters. “We do need their support in terms of funding.”

He said G.M. can work with a partner in a “shared power structure,” and cited the success of the company’s joint ventures in Korea and China.

As part of any transaction for its European operations, G.M. is not necessarily going to include its traditionally profitable Latin American business — a major prize for Fiat, which is already a crucial player in the region.

“Our business in Latin America has been a very solid contributor in recent years,” Mr. Henderson said. “It’s a business we know well, have operated over time, and a business that we like very much.”

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G.M. is demanding a stake in the new Fiat-led auto group in exchange for the European and Latin American operations, but the two companies are still far apart on the terms of any deal. G.M. wants at least 30 percent and Mr. Marchionne is prepared to give up less than 10 percent.

Mr. Marchionne has long argued that consolidation is vital to the global auto industry if it is to become profitable long term.

According to an outline of Project Phoenix, presented by Fiat executives and obtained by The New York Times, the new company would be led by Fiat’s auto group and include G.M.’s Opel and Vauxhall brands in Europe and its Latin American and South African operations.

Fiat would retain control over Ferrari and Maserati, the sports car brands, as well as Fiat’s farm equipment business, and would hold the majority stake in the new company.

If Fiat were to gain control of G.M. in Europe and Latin America, in addition to the Chrysler stake, the combined company could produce 6.4 million cars a year. That would put it behind Toyota, but ahead of Volkswagen, Renault, G.M. and Ford.

The Fiat chief wooed Mr. Franz by promising that together, they could take on VW, now Europe’s biggest automaker. “He was well prepared,” Mr. Franz added.

On Friday, Mr. Marchionne met with Roland Koch, governor of the German state of Hesse, home to Opel’s headquarters, as well as Kurt Beck, the governor of Rhineland-Palatinate, where a major engine plant is located in the city of Kaiserslautern.

Mr. Marchionne presented Project Phoenix at the meetings, but it only added to fears of deeper job losses in the future, according to one official present. “Fiat didn’t provide enough details, and we have more questions,” said the official, who insisted on anonymity because the negotiations were not over.

Project Phoenix calls for 7 billion euros in state backing for a maximum of five years, while promising “a minimal number of plant closures, with no German car assembly plants being impacted.”

Instead, the G.M. plant in Luton, in Britain, would be shut, as would the Kaiserslautern plant, while the work force would be trimmed at German factories in Rüsselsheim and Bochum; in Antwerp, Belgium, and in Zaragoza, Spain.

Bill Vlasic contributed reporting from Detroit.

This story originally appeared in the The New York Times