EU warns on German aid in Opel deal

BERLIN, Oct. 17 (UPI) -- Germany's offer to back the purchase of General Motor Co.'s Opel subsidiary with state aid may doom the deal with European regulators, observers say.

European Union regulators Friday expressed concerns about Germany's financing offer to potential Opel buyer Magna International Inc., which would be dependent on Magna winning the bidding for the automaker, The Wall Street Journal reported.

European Competition Commissioner Neelie Kroes wrote in a letter to German Economics Minister Theodor zu Guttenberg that the contingency wouldn't "be incompatible with EC (European Commission) Treaty state aid and internal market rules" because the same offer isn't being extended to other Opel bidders, the newspaper said.

Analysts told the Journal that Kroes' letter signals that the European Commission may try to block a Magna-Opel deal if it comes before them in its current form, which could, in turn, cause Germany to drop its offer and trigger an Opel bankruptcy filing.

The Journal noted that Belgian private-equity group RHJ International Inc. has also made a bid for Opel -- a deal that GM's senior management at first supported but later dropped when it became clear Germany officials favored the Magna bid.