Germany wants Opel money back

General Motors' shock decision to pull out of a sale of its Opel/Vauxhall division in Europe has sparked outrage from the German government and fresh uncertainty for the car maker's 55,000 European workers.

German Chancellor Angela Merkel had offered €4.5 billion to sweeten the sale to Canada's Magna and Russia's Sberbank in an effort to save as many German jobs as possible.

Economy Minister Rainer Bruederle said the decision not to finalise a preliminary deal hammered out in September was 'totally unacceptable', while the IG Metall union vowed to stage protests.

Meanwhile, a Russian government spokesman expressed surprise and said the Magna-Sberbank consortium intended to carry out 'a deep legal analysis' of the situation.

Merkel, ahead of elections on September 27, had lobbied hard for GM to sell to Magna, believing that the Canadian firm offered the best chance of Opel's 25,000 German workers keeping their jobs.

In a terse overnight statement, Merkel's spokesman, Ulrich Wilhelm, said Germany wanted GM, majority owned by the US government since emerging from bankruptcy earlier this year, to pay back a €1.5 billion loan made earlier this year. The loan expires at the end of November.

Germany had also offered Magna, which together with state-owned Sberbank was due to buy a 55% stake in Opel, €3 billion in state loan guarantees.

Germany had been in negotiations with other European countries to assume some of the state aid package, but the talks were bogged down because of fears that taxpayers' money would primarily save German jobs.

The British government, which had made no secret of its dislike of the Magna deal when it was first announced, said it would 'work closely with GM to understand their plan for the business and what it means for the UK'.

But with GM saying it was planning a €3 billion restructuring plan for its European business, it was clear that even with Magna out of the picture, large numbers of jobs were still set to go.

GM last night opted to keep the European division, saying improving business conditions and the strategic importance of Opel had prompted the unexpected move by its 13-member board of directors.

Meanwhile, the White House said today that it had nothing to do with General Motors' decision to scrap plans to sell its unit Opel to a Canadian-Russian consortium.

'Business decisions by GM are made by the corporate leadership at GM and not by anybody at the White House,' a spokesman said.