Berlin - Schaeffler, the struggling German automotive parts group, may receive an investment offer from a sovereign investor in the United Arab Emirates (UAE), a German newspaper reported Tuesday.

Schaeffler, originally a maker of ball bearings, controls Continental, the bigger German group that makes tyres and electronic parts. It has asked its own staff to go without pay rises as it struggles against a crushing level of debt.

On Sunday, the owners, Maria-Elisabeth Schaeffler and her son Georg Schaeffler, asked for government aid. They said in a written statement they were willing to lose some equity in Schaeffler to save the company.

The Financial Times Deutschland newspaper quoted "financial sources" saying the International Petroleum Investment Company
(IPIC) of Abu Dhabi had shown interest and was considering a bid for at least 20 per cent, and more likely 25 per cent, of the group.

The newspaper said IPIC was still at the stage of seeking a first contact with Schaeffler management, so it was not yet clear if actual negotiations would follow. IPIC was contemplating buying into either Schaeffler or Continental.

Schaeffler spent 10 billion euros (13 billion euros) to buy into Continental. The target firm's value slumped as the world economic crisis spread, meaning Schaeffler paid well over market value to pursue its ambition of creating a new "global champion."

On Monday, Schaeffler management confirmed it had appealed to labour to wait until December 1 for a pay rise that Schaeffler had earlier promised on May 1. It has already reduced working hours for 20,000 staff as it copes with a slump in orders.

Wolfgang Mueller, an official of the trade union IG Metall, said it was a sign of Schaeffler's desperation.

The German government has been largely unreceptive to Schaeffler's appeals, with leading politicians saying it is not the function of the state to offer loans to secure the current proprietors' control. (dpa)