July 29 (Bloomberg) -- Germany’s government asserted its right to reject any buyer for General Motors Co.’s Opel unit, increasing the risk of trans-Atlantic friction as Chancellor Angela Merkel seeks to protect jobs before September elections.

A successful bid needs the backing of Germany’s federal government and the four states where Opel has plants because without German aid “the sale is not sustainable,” Ulrich Wilhelm, Merkel’s chief spokesman, told reporters in Berlin.

“An agreement by GM with one of the two remaining investors would not be enough,” Wilhelm said today. “Federal and state governments have to be in a position to support such an agreement.”

While the German government’s preferred buyer is Magna International Inc., a GM negotiator has said the simpler solution for the U.S. carmaker is offered by a rival bid by RHJ International SA, founded by Timothy C. Collins. At stake is 1.5 billion euros ($2.1 billion) in short-term loans the German government has agreed to provide for the sale.

“GM is visibly trying to thwart Magna,” Ferdinand Dudenhoeffer, head of the Center for Automotive Research at the University of Duisburg-Essen, said in a phone interview. “Merkel should step into talks with the U.S. government as quickly as possible. After all, they’re the de-facto owners of GM.”

Washington Talks

Merkel’s chief economic adviser, Jens Weidmann, is in Washington this week for talks with officials from the Group of 20 nations ahead of a September G-20 summit. “It’s possible” he may also discuss Opel with U.S. officials, Wilhelm said.

Merkel’s government is pushing GM to pick Aurora, Ontario- based Magna as the winner, two people familiar with the situation have said. Labor unions also prefer Magna, adding to pressure on Merkel as she seeks to ride her Christian Democratic bloc’s lead in the polls to re-election on Sept. 27. Of GM Europe’s 55,000 jobs, 25,000 are in Germany.

GM hasn’t specified a preference, John F. Smith, the U.S. automaker’s chief negotiator for the sale of Opel, said in an online blog yesterday.

Even so, the bid by RHJ, a Brussels-based investor started by Collins, the chief executive officer of Ripplewood Holdings LLC who was appointed as an outside director to Citigroup Inc. on July 24, “would represent a much simpler structure and would be easier to implement,” Smith wrote. “We remain fully open to reaching a satisfactory conclusion with either bidder.”

No Loan Guarantee

Any GM decision in favor of RHJ would mean a loan guarantee not being made, Dieter Althaus, the prime minister of Thuringia, one of the German states with Opel plants, told the MDR broadcasting network.

“We insist on a top-level meeting with the states, the federal government and GM before such a decision is taken,” Althaus said.

Roland Koch, the prime minister of Hesse, the state where Opel is based, told Handelsblatt newspaper that all the states oppose a sale to RHJ.

Germany is not “the executor of wishes from Detroit,” Handelsblatt cited Koch as saying in an advance copy of an article in tomorrow’s edition.

Magna Cash

Magna, which is bidding for Opel with Moscow-based OAO Sberbank, would provide 350 million euros of cash directly, a German government official said yesterday. Another 150 million euros will be provided through a convertible bond.

Germany welcomes an improved cash offer by Magna for Ruesselsheim-based Adam Opel GmbH, which has been under GM control since 1929, Wilhelm said. The German government is committed to closing Opel’s sale by the fall, he said.

The “perpetual haggling” over Opel is becoming increasingly irritating for all the bidders involved, according to Dudenhoeffer. Germany has “a clear say in this and Merkel should point that out to the U.S. government.”

Magna, the largest Canadian car-parts maker, and Sberbank always planned to invest about 500 million euros in Opel. They initially aimed to pay no more than 100 million euros in cash.

Magna and Sberbank would each own 27.5 percent of Opel, leaving GM as the largest shareholder with 35 percent, according to plans the component manufacturer outlined on July 20.

Opel is now owned by a German government-backed trust, shielding it from Detroit-based GM’s June 1 bankruptcy filing in the U.S. Germany’s proposed 1.5 billion-euro loan to ease Opel’s sale is limited to six months, expiring at the end of November.

To contact the reporters on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net; Andreas Cremer in Berlin at acremer@bloomberg.net.

Last Updated: July 29, 2009 11:05 EDT