Government aid playing favorites?: How could that happen?

Now that it looks as if another company might win Opel, the German government is making its aid offer more explicitly tied to which company has the winning bid. So much for the impression of there not being any bias. From the WSJ.

Germany's government sent a message to General Motors Co. on Wednesday: If GM sells its European car business to anyone other than Magna International Inc., then Germany might withdraw its offer of state aid.

The warning comes as German politicians grow increasingly nervous about who will win the auction for GM's European operations, centered on its Opel brand, a major employer in Germany and several other European countries.

Germany's strong hint could bolster Magna's chances, despite intense interest from other parties. Without government help, investors would struggle to finance the money-losing Opel and GM's Vauxhall in Britain.

Six weeks ago, Germany thought GM was on course to sell control of Opel to Magna, a Canadian-Austrian automotive supplier that has promised to keep Opel's German factories running. German politicians, facing national elections Sept. 27, pledged to support Magna's plan with €4.5 billion ($6.3 billion) in loan guarantees.

Since then, the divergent interests of Detroit and Berlin have become clear, and the auction is turning into a game of chicken between GM and Germany.

A newly confident GM, emerging faster than expected Friday from bankruptcy proceedings, is growing cool on Magna after failing for weeks to bridge differences with Magna over issues including access to GM technology and world markets.

GM's preliminary, nonbinding accord with Magna in late May was "a shotgun wedding" under political pressure from Germany, said one person close to GM. . . . .

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