Schaeffler could get aid with viable plan-paper

FRANKFURT, June 7 (Reuters) - The German government could be willing to provide German automotive supplier Continental (CONG.DE: Quote, Profile, Research) and Schaeffler with financial support, Lower Saxony's Premier Christian Wulff told Focus magazine.

If the two companies agreed on a viable post-merger business plan, then loan guarantees would be half financed by Germany's economic stimulus fund and the other half by the states in which the companies have plants, he told the magazine in an interview to be published on Monday.

Last July, ball-bearing maker Schaeffler launched a hostile $18 billion bid for Continental but ended up collecting more shares than it could afford, lumbering it with debt as car sales collapsed.

Schaeffler is grappling with debts of almost 11 billion euros ($15.6 billion) and said it may have to lay off 4,500 staff as it struggles through a recession which it believes may last another four years.

After months of negotiations with creditors Schaeffler said last month it was mulling a plan that could see it take the junior role in a merger with Continental. [ID:nLK251649]

"If the concept is viable, we will examine guarantees to support the project," Wulff told Focus.

But he said that all parties involved, including owners, banks, the government and employees would need to contribute to a possible solution.

For a factbox on German companies seeking state support, double-click on [ID:nLQ944830]

(Reporting by Maria Sheahan; Editing by Jason Neely)