Hope for Opel as Magna seals preliminary pact with GM

Fri May 29, 2009 11:30am EDT
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By Philipp Halstrick and Gernot Heller

FRANKFURT/BERLIN (Reuters) - Canadian car parts group Magna has reached a preliminary deal with General Motors to invest in its German unit Opel, sources close to the negotiations told Reuters on Friday.

The sources said Magna and GM still had to work out details before an expected meeting later on Friday with German Chancellor Angela Merkel.

Separately, a government spokesman said a meeting with Merkel and top government officials had been pushed back until 6 p.m. (12 p.m. EDT) due to ongoing negotiations between GM and Magna.

"We have an agreement in principle between GM and Magna," one source said.

The German government has been scrambling to safeguard Opel's future before its U.S. parent files for bankruptcy, a step which could come within days.

A first round of talks between Germany, the U.S. government and GM collapsed amid mutual recriminations on Thursday morning, prompting Berlin to set a new round of negotiations for Friday.

Italian carmaker Fiat, Magna's main rival in the battle for Opel, said hours before the talks were to begin that it would not participate. That left the door open for Magna, which has been in intense discussions with GM representatives for the past 24 hours.

Talks collapsed on Thursday when Washington balked at Germany's plan to temporarily place Opel assets in a trust to shield them from GM creditors. Berlin responded by refusing to release 1.5 billion euros ($2.10 billion) in bridge financing for Opel.   Continued...

<p>New Opel cars are pictured at the Opel plant in Bochum May 29, 2009. REUTERS/Ina Fassbender</p>