May 5, 2009 at 1:00 am

Fiat presses Opel alliance

But experts say a merger is unlikely, and would cost jobs in Europe

Marchionne )

A top labor representative on the board of General Motors Corp.'s German carmaker Adam Opel said he does not believe that GM would want to combine its European operations with Fiat SpA's auto business and its prospective stake in Chrysler.

The three-way deal proposed by Fiat would create a huge automaker that would be a tough competitor against GM in the U.S. market, said Klaus Franz, a member of Opel's supervisory board.

"I can't believe that GM is interested in this," Franz told The Detroit News after meeting with Fiat Chief Executive Sergio Marchionne on Monday.

Franz has expressed concerns from the outset, fearing that such a deal would lead to job losses for European auto workers.

GM Chief Executive Fritz Henderson confirmed to reporters Monday that GM was in talks with Fiat and other parties about its European operations, but GM officials declined to discuss the negotiations.

Nearly three years ago, GM rejected a proposal to team up with the Renault-Nissan alliance on the grounds that the partnership would benefit Renault-Nissan more than it would help GM.

But circumstances have changed dramatically since then. GM is struggling to stave off bankruptcy and it is seeking outside investors for Opel.

Canadian auto supplier Magna International Inc. confirmed Monday that it was in talks with GM and German officials about acquiring a minority stake in Opel.

Last week, as part of an effort to form a big automaker selling between 5 million and 6 million vehicles a year, Fiat signed accords to take an initial stake of 20 percent in Chrysler.

On Monday, a day after Fiat's board authorized Marchionne to explore a merger with GM's European operations, he outlined his plan to German politicians in Berlin.

The German government's reaction is critical because Opel, the heart of GM's European operations, is seeking aid from Germany.

Nearly half of GM Europe's 54,500 employees work for Opel in Germany.

After the meeting, German Economy Minister Karl-Theodor zu Guttenberg told reporters that Fiat's plan was interesting but that the government needed to study it further.

He said Marchionne's plan would require some consolidation in Germany but not massive cuts.

Fiat would keep the Opel brand and the carmaker's three assembly plants in Germany, although an engine factory in Kaiserslautern might be in doubt.

Asked about the impact on jobs, Guttenberg said Marchionne "hasn't offered any specific numbers yet, but he described them as not being too dramatic."

He said Fiat had estimated the short-term financing needs stemming from GM's debts and pension obligations at between 5 billion and 7 billion euros, or $6.6 billion to $9 billion.

That could be covered by loan guarantees from various governments.

Franz, the top employee representative for GM Europe and on Opel's supervisory board, said Marchionne was eloquent and had a good understanding of the car business.

But he said the Fiat boss had not dispelled his concerns during the talks, which lasted two and a half hours.

Franz fears a deal would lead to job cuts. He said Fiat and Opel's combined surplus capacity in Europe totaled 1 million units -- roughly the annual output of three assembly plants.

Franz said he also was concerned about the overlap between the model ranges and the positioning of the Opel brand in the new group.

Opel vehicles now command higher prices than Fiat cars in the same segments. "This is a concern from Opel's point of view," Franz said.

IG Metall union official Armin Schild, who also sits on Opel's supervisory board, expressed similar concerns on German ZDF television.

He said Fiat and Opel "are in the same markets with roughly comparable vehicles." He added that "these two companies can give each other little, but take a lot away from each other."

ctierney@detnews.com">ctierney@detnews.com (313) 222-1463 Staff Writer Robert Snell and the Associated Press contributed.