Marchionne's plans for a new carmaking group would involve spinning the vehicle making Fiat Group Automobiles division out of the Fiat Group and combining it with GM Europe's Vauxhall, Opel (above, Astra model) and possibly Saab units, as well as throwing in the 20 percent stake that Fiat took last week in Chrysler.

Fiat CEO Sergio Marchionne outlined his bold proposals to create Europe's biggest carmaker to German government ministers in Berlin yesterday, a plan that will call for 5-7 billion euros in state aid; ministers described his ambitious plans as being "interesting".

Marchionne's plans would involve spinning the vehicle making Fiat Group Automobiles division out of the Fiat Group and combining it with GM Europe's Vauxhall, Opel and possibly Saab units, as well as throwing in the 20 percent stake that Fiat took last week in Chrysler. "It is an interesting approach, without question," German Economy Minister Karl-Theodor zu Guttenberg told reporters after his meeting with Marchionne in Berlin yesterday. He said that the Fiat boss' plans would now merit further detailed consideration.

With news of Marchionne's ambitious plans making the top headlines on TV news channels across the world yesterday, the looming prospect of a national election in Germany, due in the autumn, means that job preservation is a sensitive issue for the government especially as the bulk of the 25,000 Vauxhall/Opel jobs are clustered in Germany (GM Europe also has plants in Belgium, Spain and the UK). Guttenberg said that Marchionne has assured him all the German assembly plants would be safe under his plan though the axe might fall on an engine and components manufacturing facility near Kaiserslauten. Guttenberg however admitted in TV interviews last night that any solution for the future of Vauxhall/Opel would most likely result in job losses.

The minister also revealed that Fiat wasn't planning to take on new debt to created the new carmaking group, instead Marchionne aims to use the unique opportunity presented by the deep global financial crisis to take advantage of governments offers of loans and guarantees. He believes that the new carmaker will need around 5-7 billion euros in state bridging loans and he will tap governments for assistance in countries where the group has factories. Previously the German government has strongly hinted that it could make some 3.3 billion euros in loans available to Opel if it can produce a viable plan to take it forward that will move it away from the current total ownership of equity by GM. Marchionne would seek other loans from governments including the UK where GM Europe has two factories (Ellesmere Port which builds the Astra and a van making plant in Luton).

Marchionne also has to win over the unions in Germany; however Opel's labour union leader Klaus Franz struck a much less belligerent note yesterday, telling reporters at the Eisenach factory in Germany that "we will not be hostile to anyone but we will undertake a very careful risk analysis." In recent days he had been forthright in his hostility to the Fiat bid. Marchionne will also have to address the fears of job losses already expressed by the Italian unions. He has offered to switch production of Fiat's best-selling Grande Punto supermini from Italy to Germany in a bid to placant Opel's unions.

Fiat's closest rival for a stake in Vauxhall/Opel's future comes from Canadian-Austrian automotive components and contract manufacturer, Magna International, which confirmed within hours of Marchionne arriving in Berlin yesterday that it was seriously talking to the German government about taking a stake. Magna, which made a bid to buy Chrysler LLC two years ago before losing out to Cerberus Capital Management, has long eyed up becoming a vehicle manufacturer in its own right. In a statement Magna said that it was talking to Vauxhall/Opel about "alternatives for the future". However it sounded a note of caution, saying that: "there is no assurance that any transaction will result from Magna’s current involvement." Magna, which reportedly has backing from a consortium of Russian banks, its seeking a stake in Vauxhall/Opel rather than making an outright bid for control.