German efforts to forge a rescue for General Motors Corp unit Opel were under threat on Friday after Italy's Fiat SpA skipped a crucial round of talks in Berlin and frustration mounted at rival bidder Magna.
The German government is 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.
But Fiat Chief Executive Sergio Marchionne said hours before those talks were to begin that his company would not participate and expressed exasperation at being pulled back and forth between the demands of Germany and GM.
"We remain committed to finding ways to bridge the expectations of both General Motors and the German government but the emergency nature of the situation cannot put Fiat in a position to take on extravagant risks," Marchionne said.
A source close to the negotiations said Magna International Inc, a Canadian car parts group, was growing increasingly frustrated with new demands from GM.
"The hopes of getting an agreement are vanishing by the minute," said the source. "The feeling is growing that GM doesn't really want to sell."
A separate source at GM told Reuters that the situation would become very serious if the parties were unable to reach a deal on Friday that would free up 1.5 billion euros in bridge financing for Opel pledged by the German government.
"If the bridge financing is not secured, I think the situation becomes very dire," the source said. "The issue of insolvency becomes far more a factor. When and how and where that would take place all has to be determined."
INSOLVENCY RISKS RISE
German government spokesman Thomas Steg said he still expected high-level talks between Berlin, the U.S. govenrment and GM to take place later on Friday, but said a precondition was having something "substantial" on the table.
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 the 1.5 billion euros for Opel.
The setback means the likelihood of an insolvency for Opel has risen.
German Chancellor Angela Merkel, who faces an election in four months time, will want to avoid any step that might lead to mass job losses.
But she is under pressure from conservative allies to follow through on the insolvency threat if Washington does not provide Berlin with sufficient guarantees that German taxpayers will not end up footing the bill for Opel.
Based in Ruesselsheim near Frankfurt, Opel employs 25,000 staff in Germany and has been under GM's wing for 80 years.
It is part of a GM Europe operation that employs over 50,000, with car manufacturing plants in Spain, Poland, Belgium and Britain, where Opel cars are sold under the Vauxhall brand, as well as engine and parts sites such as Aspern near Vienna.
Like its parent GM, Opel has suffered acutely from the worldwide economic slowdown. Its fate is being followed closely in Germany, where the auto industry remains a potent symbol of the country's postwar recovery and export-driven economy.
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