Magna, Fiat improve bids as Opel battle heats up

By Nicola Leske and Andreas Moeser

FRANKFURT/BERLIN (Reuters) - Magna International and Fiat have improved their offers for General Motors unit Opel ahead of a crucial week in which the German government is expected to decide which bid to back.

German Chancellor Angela Merkel will hold a meeting of top minister on Monday to review bids from Magna, Fiat as well as Belgium-listed industrial holding company RHJ International. No final decision, however, is expected on Monday.

Italian Fiat improved its offer on Saturday after top German officials said that Magna, a Canadian car parts group, submitted a better plan than its rivals. Magna has also improved its bid, a source close to the negotiations told Reuters on Sunday.

But Economy Minister Karl Theodor zu Guttenberg said on Sunday the three bids were still unacceptable because the government would shoulder too much potential financial risk. He told journalists in Berlin the bids had to be improved.

"The plans are not yet at a level where we would have sufficient security," Guttenberg said. "They need to be improved quite considerably." He added a controlled insolvency could not be ruled out. "We obviously want to avoid that. But on the other hand we can't squander billions of euros in taxpayer money."

General Motors and the German government are in a race against time to finalize a sale of Opel, which is headquartered in Ruesselsheim near Frankfurt.

The U.S. government has given GM until June 1 to restructure its operations and prove it can be viable without state aid, or face probable bankruptcy.

The decision on who gets Opel will be taken by GM but the German government will play a big role because it would likely supply billions of euros in financing guarantees.