STUTTGART/WASHINGTON (Reuters) - Daimler swung to a hefty loss, hit by exposure to Chrysler, and Opel and Saab braced for news of General Motors' survival plan, as European carmakers saw their fates tied closely to their U.S. peers.
While the struggling U.S. duo put the finishing touches to blueprints showing how they aim to pay back billions of dollars of government loans, Chrysler's German ex-owner Daimler said its remaining 19.9 percent stake in the Detroit-based manufacturer had driven it to a steepling fourth quarter loss.
The premium carmaker also forecast the global recession ravaging the industry would slash auto demand by about 10 percent this year, pushing down revenue and forcing it to cut its 2008 dividend.
German peer Opel awaited news from its U.S. partner as GM prepared to present the U.S. government later on Tuesday with a plan for survival that is expected to incorporate wide-ranging changes to its European operations.
Against a background of strident calls for more state aid from embattled manufacturers on both sides of the Atlantic as concerns about protectionism grow, GM and the United Auto Workers union made progress in concession talks and bondholders offered proposals to slash GM's debt.
GM was not expected to reach detailed agreement by Tuesday's deadline but talks with both key groups made progress on the final day, people briefed on the discussions said late on Monday.
Options on the table for Opel and GM's Swedish unit Saab include securing ring-fenced loan guarantees from Berlin and Stockholabor spinning off the two businesses as independent entities - a scenario favored by GM Europe's labor leaders.
Saab could also be sold or closed down, analysts believe, though Swedish Industry Ministry secretary Joran Hagglund told Reuters he is confident GM will not leave Saab unprotected.
Amid reports GM could close three or more plants in Europe, a labor leader at the Bochum factory in western Germany said the company's management had told him they will do their utmost to save the German plants.
Efforts by GM to offload businesses further afield suffered a setback as China's Sichuan Auto Industry Group Co denied a report it was interested in buying Hummer.
In Milan, Fiat, which last month agreed to take a 35 percent stake in Chrysler after warning in December it was too small to survive the brutal industry downturn as a standalone company, denied a news report it was considering a 2 billion euro ($2.53 billion) rights issue.
Despite the denial, Fiat shares remained under pressure, trading down 7.22 percent at 3.98 euros at 1400 GMT compared with an intraday low of 3.91.
Daimler swung to a fourth-quarter loss before interest and tax of 1.95 billion euros, significantly beyond the average estimate of a 250 million loss in a Reuters poll of 21 analysts.
Exposure to Chrysler crippled the group's 2008 EBIT by 3.23 billion euros, encompassing Daimler's share of operating losses proportionate to its stake plus 1.84 billion of writedowns.
It warned of a pronounced decline in all major car markets in the first half of 2009, giving no detailed outlook for the full year as some analysts said they were now expecting the company to post a loss.
The risk is very big that this year a loss will be made (by the company), said Metzler Bank analyst Juergen Pieper. (Daimler's) expectation that the passenger car market this year contracts by only 10 percent is too optimistic.
The question is not if Daimler loses money in 2009, but how much, Morgan Stanley said in a research note.
Daimler Chief Executive Dieter Zetsche promised several billion euros of cost cuts and savings and the company slashed its dividend to 0.60 euros per share from 2.00.
After falling as much as 7.4 percent, Daimler shares pared losses to trade down 4.05 percent at 22.60 euros by 9 a.m. EST.
(Additional reporting by Victoria Klesty, Angelika Gruber, Love Liman, Gilles Castonguay; Writing by John Stonestreet; Editing by David Cowell)