Angry German workers planned protests on Thursday after General Motors said it would cut some 10,000 jobs at its European unit Opel in a move slammed as a slap in the face for Chancellor Angela Merkel.
GM wants to slash costs by 30 per cent at Opel, which would mean the elimination of about 10,000 jobs from a workforce of around 50,000, GM vice president John Smith told a telephone news conference.
The announcement came a day after the US car maker stunned the auto sector by scrapping plans to sell the German-based unit, and just hours after Merkel gave a historic speech before a joint session of the US Congress.
"Opel -- the big piss-take," screamed the front-page headline of the mass-selling Bild newspaper. "The Americans duped everyone."
"It is truly tragic," wrote the Berlin daily Der Tagesspiegel, calling the decision a "stinging slap in the face" for the chancellor.
"On the same day Merkel enjoyed her great triumph she also experienced her worst embarrassment. It's a disaster for German-US relations."
Merkel's government had invested major financial and political capital in saving Opel from insolvency before a September general election which she handily won. About half the company's employees work in Germany.
Beyond pledging 4.5 billion euros (6.6 billion dollars) in German state aid for the ailing company, Berlin spent months shepherding a rescue deal.
Economy Minister Rainer Bruederle fumed that GM's U-turn was "totally unacceptable" while North Rhine-Westphalia state premier Juergen Ruettgers said the move showed "the ugly face of turbo-capitalism".
But General Motors, which was struggling with a bankruptcy reorganisation backed by the US and Canadian governments, said it was abandoning the agreed plan to sell Opel to Canadian auto parts manufacturer Magna and state-owned Russian bank Sberbank, and would restructure the unit itself.
GM also warned employees and unions that it could still allow Opel to flounder if the workforce upholds its threat to refuse wage concessions -- a move blasted as "blackmail" on Thursday by the daily Sueddeutsche Zeitung.
The company also estimated it would need three billion euros in state aid, and was confident it could secure the sum from the German government and other European countries where Opel and the British Vauxhall division have plants.
US President Barack Obama's spokesman insisted his government had nothing to do with the about-face.
"Business decisions by GM are made by the corporate leadership at GM and not by anybody at the White House," spokesman Robert Gibbs told reporters.
But the Sueddeutsche newspaper was sceptical.
"Perhaps (US President Barack) Obama genuinely wasn't in the picture when he received Merkel in the White House (on Tuesday), although this doesn't say much for him," it said.
"Perhaps he did know something, and that would put him in an even worse light. In any case, with their inconstancy the GM managers have caused serious damage to German-US relations."
Smith acknowledged that "the German government had a very strong appetite for the Magna proposal, so I can well imagine and well understand" the German reaction.
"I am hopeful they will find merit in our plan."
Smith contended that there had been very little difference between the offers put forward by Magna and a rival bidder, the Belgian investment firm RHJI, and what GM has in mind for Opel.
But he added: "We continue to believe that we can restructure Opel with less money than any other investor."
Meanwhile Britain's biggest trade union said it was keen to work with GM to ensure job cuts at Opel were voluntary while the government called for talks with the US manufacturer.
"I have always said that if the right long-term sustainable solution is identified, then the government would be willing to support this," business minister Peter Mandelson said.