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Berlin and US at loggerheads over GM

GENERAL MOTORS (GM) and Berlin were at loggerheads yesterday, as the debate over who should buy the US company&rsquo;s European arm, made up of Opel in Germany and Vauxhall in the UK.<br /><br />Germany said yesterday it may renege on its offer of state aid if the US company, which came out of bankruptcy last week, sells to anyone but Canadian company Magna International, while the carmaker is said to favour RHJ International, a Belgian investment group.<br /><br />RHJ has good connections in Berlin &ndash; its chief executive Leonhard Fischer used to run Dresdner Bank &ndash; but private equity has suffered from a poor reputation in Germany since long before the financial collapse.<br /><br />People familiar with the talks say RHJ says it will not close plants in Germany, but this is being met with disbelief.<br /><br />RHJ, which has been listed since 2005, has not yet made a profit, although it tends to focus on the value of its assets and cash flow.<br /><br />Magna has heavy backing from unions and four German states who have offered financing to the deal.<br /><br />Without state backing, investors will struggle to fund the ailing company, which GM is selling off as part of a major restructuring plan.<br /><br />Magna, an automotive supplier which had promised to save German jobs, had been the favourite to buy GM Europe. <br /><br />A sale to Magna got the backing of politicians in Berlin &ndash; facing re-election in September &ndash; who promised &euro;4.5bn (&pound;3.86bn) in loan guarantees. <br /><br />But as GM rises from bankruptcy more confidently and faster than expected, it is cooling towards the Canadian firm, as disputes rise over access to technology and world markets. Magna&rsquo;s non-binding accord with GM has been described by some analysts as a &ldquo;shotgun wedding&rdquo;.<br /><br />German Chancellor Angela Merkel said yesterday that her government was trying to clear up the remaining questions in Magna&rsquo;s bid for GM Europe as soon as possible.