May 26 (Bloomberg) -- Fiat SpA’s revised offer for General Motors Corp.’s Opel division, which may require 3 billion euros ($4.19 billion) in German government loan guarantees, doesn’t provide a broad enough car-industry concept to win backing, a state minister involved in the talks said.

Fiat would eliminate fewer than 10,000 jobs in Europe, including 1,600 to 2,000 positions in Germany, according to two people familiar with the plan. The guarantees would be part of 6 billion euros in backing that the Turin, Italy-based carmaker would seek from governments across Europe, said the people, who asked not to be identified because the plan is confidential.

“Whoever presents a concept with an unsound basis and then rushes to improve on it acknowledges that the plan was flawed in the first place,” Hendrik Hering, Rhineland-Palatinate’s economy minister, said in a phone interview. “I can’t imagine” that Fiat’s improved offer will dispel doubts, he said today. Hering declined to disclose details of Fiat’s new proposal.

GM is selling a majority stake in Ruesselsheim, Germany- based Opel, including the U.K. Vauxhall brand, to secure the unit’s survival as the U.S. parent company faces a deadline of June 1 to reorganize or go into bankruptcy.

Fiat’s competitors for the Opel stake are Magna International Inc., Canada’s biggest car-parts maker, and RHJ International SA, an investment fund with automotive assets including some former holdings of private-equity firm Ripplewood Holdings LLC. German federal and state government officials aim to decide tomorrow on which offer they’ll support.

Magna’s ‘Pole Position’

Magna is “in the clear pole position” for the acquisition, Klaus Franz, the top labor representative at GM Europe, said today at a news conference at Opel’s headquarters near Frankfurt. Workers have a say in the sale because the business plan calls for $1.2 billion in concessions from GM Europe employees.

Opel would lose about 10,000 jobs under all three bids, Franz said. Aurora, Ontario-based Magna’s concept comes the closest to providing long-term prospects for Opel, while RHJ’s “interesting” proposal is more open to holdings in Opel by dealers and employees, Franz said. Fiat’s would “dramatically worsen” overcapacity, he said.

Magna’s business plan is “more profound” than Fiat’s because it aims to supply Opel with vehicle parts directly and allow the GM division to develop ties with other suppliers, Hering said. The offer by Fiat, Italy’s biggest manufacturer, uses “old concepts” and focuses on production cuts to prevent an overlap with Opel models, he said.

States’ Backing

The four German states with Opel factories favor Magna’s proposal, Hering said on May 20, the day the three suitors submitted bids.

German Chancellor Angela Merkel and Economy Minister Karl- Theodor zu Guttenberg met Fiat Chief Executive Officer Sergio Marchionne in Berlin today. All bidders need to revise their proposals to reduce risks for Opel’s employees, Guttenberg told reporters afterward, calling the Italian company’s proposal “not bad.”

Marchionne, calling the talks “constructive,” said in a Bloomberg Television interview that “it’s a lottery right now” as to which suitor will win government backing.

Detroit-based GM employs 55,000 workers in Europe, with Opel’s workforce in Germany totaling 25,000 people. Executives from Magna and Brussels-based RHJ met GM Europe labor leaders in Ruesselsheim today. Fiat didn’t send a representative, which Franz called a “provocation.”

Transaction Timeline

Opel is likely to be insulated from a GM bankruptcy, while completion of the European division’s reorganization program may take three to six months, Franz said.

Merkel, facing reelection on Sept. 27, is keen to secure the survival of Opel, Germany’s second-largest carmaker after Volkswagen AG. Guttenberg said on May 10 that he’s considering putting Opel into a government-backed trust until an investor agreement is reached. The minister said on May 24 that an “orderly insolvency” for Opel may be the best option. Franz said today that he thought the move would be unlikely.

Magna’s proposal, which would be backed by as much as 5 billion euros in state aid, foresees a partnership with Russian carmaker OAO GAZ. The Canadian company would take 20 percent of Opel while GM, the German division’s owner for 80 years, and Moscow-based OAO Sberbank, Russia’s biggest lender, would each hold 35 percent. Employees would receive 10 percent. Magna said the takeover would include a 700 million-euro investment.

Non-Cash Offer

Fiat’s initial request for European government-loan guarantees was 7 billion euros, according to people familiar with the matter. The company would contribute factories and assets from its own automaking operations, but not cash. Fiat’s bid, which also involves GM’s business in Latin America, is part of a plan to create a global automaker that would include a stake in Auburn Hills, Michigan-based Chrysler LLC.

Labor leaders said on May 13 that combining Fiat and Opel may eliminate 18,000 car-industry jobs in Europe.

To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net; Chris Reiter in Ruesselsheim, Germany, via creiter2@bloomberg.net.

Last Updated: May 26, 2009 13:23 EDT