By William Boston in Berlin and Nick Kostov in Paris 

The chief executives of General Motors Co. and Peugeot moved quickly on Wednesday to head off political resistance in Germany to the potential sale of GM's Opel unit to its French rival.

Both companies said on Tuesday they were in talks that could lead to the sale of GM's troubled European business to Peugeot. It quickly became clear, however, that political opposition to job cuts in a year of hotly contested elections in Germany and France would be one of the biggest obstacles to any deal.

GM Chief Executive Mary Barra and the company's president, Dan Ammann, flew to Germany overnight to meet Opel's management and senior labor representatives at Opel's headquarters in Rüsselsheim. The meeting appears to be the first extensive discussion about the sale that Ms. Barra has held with senior management at Opel.

In Paris, Peugeot Chief Executive Carlos Tavares, who is credited with a swift three-year turnaround of the French car maker, reached out to German Chancellor Angela Merkel to try to win her backing for the deal, according to the company. Ms. Merkel's spokesman told reporters that the government hadn't yet received a request from Mr. Tavares for a meeting, but stressed that the government would play an active role in any sale of Opel.

"Opel is an innovative company with a long history in Germany," said Steffen Seibert, Ms. Merkel's spokesman. Considering "the consequences for jobs at many locations in Germany, it's clear that we, the government of the Federal Republic, will be involved," he said.

The push to complete a sale of Opel is a test of whether Europe can still build cross-border champions in an era of rising nationalism. The talks aim to stitch together businesses that span the U.K., France and Germany at a time when antiestablishment politicians in all three countries are seeking to pull the European Union apart.

In Germany, Alternative for Germany is likely to become the first party to the right of the mainstream conservatives to enter parliament in decades. It now polls as high as 15%. In France, far-right leader Marine Le Pen is likely to make it into the runoff round of the French presidential election in the spring, according to polls. The U.K, meanwhile, is about to formally trigger Article 50 and begin negotiations to leave the European Union.

The Opel sale opens old wounds for Ms. Merkel. In 2009, she fought hard with GM to ensure that GM's planned sale of Opel to Magna International Inc. of Canada wouldn't lead to massive job cuts at the German factories. Two months after signing the deal, GM pulled out of the sale and committed to rebuilding its European business.

GM's latest turnaround comes as Ms. Merkel faces a tough reelection bid. Her liberal immigration policies have boosted the popularity of an antiestablishment party, Alternative for Germany. And, for the first time in years, a resurgent Social Democratic party leads Ms. Merkel's conservatives in the polls. The two parties share power in Ms. Merkel's coalition government.

Surprised by GM's renewed change of heart, Ms. Merkel's cabinet held "intense discussions" about the sale and Opel's future at its weekly meeting on Wednesday, said Andrea Nahles, a Social Democrat, and labor minister.

"Our highest priority is securing the three Opel factories in Germany," Ms. Nahles told reporters after the cabinet meeting.

Opel is one of Germany's oldest car makers. The company began making sewing machines in 1862 and began making cars in 1899. GM bought the struggling company in the midst of the financial crisis of 1929.

Today, Opel and its British Vauxhall unit operate 10 factories in Europe. The company employs 38,000 people, 19,000 of them in Germany.

Brigitte Zypries, Germany's economics minister, said it was "completely unacceptable" that GM and Peugeot carried out negotiations about the sale of Opel without any involvement from trade unions or the company's workforce, which under German law has extensive rights to influence management decisions.

"We will study a potential sale of Opel/Vauxhall to Peugeot without reservations based on our previous experience with Peugeot," Ms. Zypries said.

Members of Ms. Merkel's Christian Democrats also cited job security for Opel's German workforce as their priority. Volker Bouffier, prime minister of Hesse state, where Opel is based, said it didn't matter who owned Opel, adding: "What matters is what happens here."

The deal could also run into political interference in France if French jobs are threatened, analysts said. The French government holds a 14% stake in Peugeot. And isolationist far-right leader Marine Le Pen, who could be expected to give preference to protecting French jobs, is expected to poll strongly in the looming presidential election.

Peugeot risks getting caught in a vise as governments and unions in both countries stand in the way of possible restructuring. French unions are notorious for bending political leaders to their will by paralyzing the economy with strikes and protests.

"We won't accept any deal that hurts workers in either France or Germany, whether that's through a reduction in the number of jobs or their purchasing power. We will be uncompromising," said Jean-Pierre Mercier, a member of the CGT labor union at Peugeot.

But concern that Mr. Tavares could seek job cuts elsewhere, such as at Vauxhall, GM's British auto maker, to secure the support of Germany and France, sparked warnings from Britain's Unite trade union.

Len McCluskey, Unite's general secretary, said GM's decision was likely a result of the Brexit vote and called on the U.K. government to provide assurances to Vauxhall just as the government did to convince Nissan to continue producing its Qashqai sport-utility vehicle in the U.K.

"It cannot be that the future of U.K. car workers' jobs now lies in the hands of the French government and their backing for Peugeot," Mr. McCluskey told reporters in London Wednesday after a meeting Greg Clark, a government minister in charge of industry strategy. "The U.K. government has to offer at least equal but actually better backing for U.K. workers."

--Zeke Turner in Berlin contributed to this article.

Write to William Boston at william.boston@wsj.com and Nick Kostov at Nick.Kostov@wsj.com

 

(END) Dow Jones Newswires

February 15, 2017 13:11 ET (18:11 GMT)

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