Germany prefers Canada's Magna bid for Opel

BERLIN: Germany's government and local states prefer the bid of Canadian auto parts maker Magna to take over GM subsidiary Opel, a key local official said Friday after talks on the deal in Berlin.

The governor of the German Rhineland-Palatinate state, Kurt Beck, said: "We are continuing negotiations but with the main focus on Magna." Italian auto giant Fiat and Brussels-based investment group RHJ International have also made offers for the General Motors unit.

There was a "consensus" between the federal government and the states, said Beck after participating in the meeting with top officials including Chancellor Angela Merkel and Economy Minister Karl-Theodor zu Guttenberg.Roland Koch, premier of the state of Hesse, where Opel's headquarters are situated, said after the meeting: "If we cannot get an agreement with Magna, then the two other bidders remain in the game."

The final decision on Germany's Opel, as well as other units of GM's European operations, including Vauxhall of Britain and Saab of Sweden, lies with GM itself and the US government, but Berlin will sweeten any deal with loan guarantees. According to press reports, Magna and RHJ were expected to ask for five billion euros (seven billion dollars) in guarantees while Fiat was reported to be requesting seven billion euros.

The Canadian firm, which is being backed by Russian car maker GAZ and Russia's biggest lender Sberbank -- is also the candidate preferred by GM, according to press reports.

The fight to save Opel, which indirectly employs around 25,000 people in Germany, has become a race against time before the parent company likely declares bankruptcy.GM is relying on more than 15 billion dollars (11 billion euros) in emergency government loans and faces a June 1 deadline to complete major restructuring or follow fellow US car maker Chrysler into bankruptcy.

The firm's chief executive Fritz Henderson said last week that a bankruptcy filing is the "more probable" outcome "given the objectives that we've set for ourselves."The battle for Opel has also become a political hot-button issue barely four months before Germans head to the polls in a general election.Chancellor Angela Merkel, up for a second term in the September 27 vote, is prepared to pull out all the stops to save Opel from collapse but being seen as writing a blank cheque on behalf of taxpayers could hurt her re-election hopes.

Government spokesman Thomas Steg said earlier Friday the government would look most favourably on the bid which would secure the most jobs and the most factories in Germany.According to a report to appear in Saturday's edition of the local paper the Rheinische Post, Magna would seek to cut 2,500 Opel jobs across Germany.