Opel rescue raises hopes, but Merkel warns of challenges

German auto-workers expressed relief yesterday after a dramatic deal to save iconic car maker Opel, but Chancellor Angela Merkel warned of a bumpy ride ahead with the industry in turmoil worldwide.

The deal, struck in the early hours of yesterday morning after marathon talks, sees Canadian parts maker Magna and its Russian backers taking over Opel as its parent company General Motors prepares to file for insolvency.

But while Germany's 25,000 Opel workers cheered the deal, Merkel - who faces a general election in four months - underlined the scale of the challenge facing the reborn company and its employees.

"For Opel and Magna, the work is now just beginning and there are several difficulties still to overcome," she told reporters.

Government sources said Magna was likely to slash around 2,500 jobs at its four plants around Germany, but stressed that all four factories would stay open, a pledge repeated by Magna bosses after the talks.

Nevertheless, General Motors employs some 50,000 people throughout Europe and Magna plans to cut about a fifth.

In total, GM employs around 7,000 in Spain, 4,700 in Britain at Vauxhall, 3,600 in Poland, 2,600 in Belgium and 1,800 in Italy.

The head of Opel's powerful works committee, Klaus Franz, was also cautious.

"I am very happy that we have managed to save Opel and that the company will not be dragged down by the insolvency of GM," Franz told AFP.

"But difficult times are still ahead of us ...Germany is not a land of milk or honey, that means there will be job losses."

"The most important thing is that the social dimension is being taken into account and that there will be no factory closures," he added.

Belgian union official Rudi Kennes, of the socialist FGTB union at Opel's Antwerp plant, gave a cautious welcome yesterday to the deal, telling the Belga news agency there would be talks with the new owners in the coming weeks.

But while the officials from Magna had struck him as "very professional", he still expected "long and tough negotiations", he told Belgian television.

Derek Simpson, joint leader of Unite, Britain's biggest trade union, expressed concern for the future of the two British plants.

"That's where I think the (British) government has to be more proactive and recognise that it has to some extent been watching in the stands while the action has been taking place on the pitch."