Europe car sales plunge, GM's Opel seeks bailout

By Gilles Castonguay and Christiaan Hetzner

MILAN/FRANKFURT (Reuters) - Europe's ailing auto industry looked to slash output further after dire October sales sent the market tumbling to its lowest level in years and forced GM's Opel unit to ask German taxpayers for a billion-dollar bailout.

A report that European firms had dropped insuring suppliers of troubled General Motors Corp and Ford Motor Co, along with the U.S. carmakers' ongoing attempts to expand government aid to the sector, provided compelling evidence of the dire financial health of the once proud 'Big Three'.

Effectively acknowledging it could no longer rely on its Detroit parent to help it, GM's German unit became the first European carmaker to request financial guarantees from state authorities to keep its business running.

"The funds and guarantees that may be required would be invested in product development and manufacturing sites in Germany and would by no means be spent outside of Europe," Opel said in a statement, thanking politicians for their support.

Talks with Berlin were slated to begin next week, with governments in states with major Opel assembly sites like Hesse declaring their willingness to examine the request after Opel's management told them the company was facing an "existential" threat should conditions at GM deteriorate further.

Hesse's conservative caretaker premier Roland Koch told a news conference in Wiesbaden that the total volume of the guarantees Opel needed was 1 billion euros ($1.27 billion), two thirds of which would be provided by the federal government.

Car sales have fallen dramatically as the global financial crisis has gathered steam, and carmakers are frantically trying to keep up with the declines in the market by slashing costs where possible and extending the usual plant idling over Christmas by a few more weeks to save cash.

In western Europe, new car registrations in October plunged 15.5 percent to just over 1 million vehicles, dragged down by extremely poor results at the Peugeot, Opel, Renault and Toyota brands.