May 4 (Bloomberg) -- General Motors Corp. started due- diligence talks last week with potential bidders for Opel, people familiar with the discussions said.

One focus is on a proposal, such as that from Magna International Inc. and Russian carmaker OAO Gaz, to take over the bulk of GM’s European unit, said the people, who asked not to be named because the talks are private. A second approach, with Fiat SpA, includes the sale of Opel in Europe and possible tie-ups with GM operations in Latin America, Europe or elsewhere, they said.

GM needs a partner to run Opel, maker of the compact Astra and midsize Insignia sedan, before June 1 or the German unit faces bankruptcy, its top labor leader said last week. GM is trying to cut $1.2 billion in costs and win European aid to keep the unit operating independent of U.S. operations.

Other parties interested in Opel include sovereign wealth funds Abu Dhabi Investment Council and the Government of Singapore Investment Corp. and three private-equity funds, one of the people said.

While GM hasn’t yet selected a frontrunner, a tie-up with Fiat may offer the best strategic solution in terms of sharing platforms, technology and management, one of the people said.

Fiat’s spokesman Gualberto Ranieri declined to comment on Opel. Fiat’s CEO Sergio Marchionne confirmed that reaching a deal with GM is his next goal, after sealing U.S. support for a partnership with Chrysler LLC, the Auburn Hills, Michigan-based automaker that filed for bankruptcy protection April 30.

Aiming for Opel

A combination of Fiat, Chrysler and GM’s European operations would generate 80 billion euros in annual revenue, Fiat’s board said in a statement yesterday.

“Now we have to concentrate on Opel,” Marchionne told Fiat-owned newspaper La Stampa of Turin, Italy, in a May 1 interview. “They are our perfect partner.”

Opel began as a manufacturer of sewing machines in 1862 and became a carmaker before GM bought it in 1929.

Identified by a lightning-bolt trademark, the unit has been in slow decline for decades as poor quality turned off consumers. Combined market share in Western Europe for Opel and Vauxhall, its British twin, fell to 7.9 percent in 2008 from 12.6 percent in 1993, according to the European Automobile Manufacturers’ Association.

Magna, Fiat and financial investors are vying for stakes in Opel. Detroit-based GM, surviving on $15.4 billion in U.S. loans, can’t provide financial support to Opel and is looking to sell a stake in the carmaker to secure 3.3 billion euros ($4.4 billion) in European state aid.

Berlin Meeting

Marchionne has said that a global auto group needs 5.5 million to 6 million vehicles annually to have the economies of scale to compete.

Combining Fiat with Chrysler and GM’s Latin American and European Opel/Vauxhall operations could create a 6.8-million unit giant.

Marchionne will present Fiat’s plan for Opel to German Economy Minister Karl-Theodor zu Guttenberg and Foreign Minister Frank-Walter Steinmeier in Berlin today. Speaking to reporters before the meetings, Guttenberg said the discussions will be “very open.”

GM is reviewing potential bids for Opel, the German unit’s managing director Hans Demant told reporters in Eisenach, Germany, today. Offers for Opel still need to be refined, and a final decision will be taken in the coming weeks, Steinmeier said at the same briefing.

Industrial Center

“We are not just talking about Opel but we’re talking about Germany’s position as an industrial center,” Steinmeier said.

Opel worker representatives have repeatedly ruled out an agreement with Fiat, Italy’s biggest manufacturer. Employees have a say in the process as GM’s rescue plan for the European unit calls for workers to make concessions. A person close to GM noted that whoever is going to take control of Opel will have to close the least-profitable plants.

“We are open to working with Magna, but not with Fiat,” Klaus Franz, head of Opel’s works council, told Bloomberg last week. A deal with Turin, Italy-based automaker, “would be a Fiat rescue at Opel’s expense,” the labor representative said, arguing Magna would offer access to technology and opportunities to enter new markets, such as Eastern Europe.

The two European automakers would have a combined 20 billion euros in debt and 1 million vehicles in excess capacity, he said.

Aid for Opel

GM, seeking $11.6 billion in additional U.S. aid, has also been trying to win aid from governments in Germany, the U.K. and Spain to obtain funds for Opel and the Luton, England-based Vauxhall brand.

Magna, based in Aurora, Ontario, hasn’t specified how much it would invest or the size of the stake it wants, Franz said April 28.

Rheinische Post, citing unidentified people close to the companies, reported April 29 that Magna and Russian partners are seeking 5 billion euros to help buy a stake in Opel. Magna would own 19 percent of the German carmaker, while Moscow-based OAO Sberbank, Russia’s biggest lender, and Nizhny Novgorod-based carmaker OAO GAZ would hold 31 percent, the newspaper reported.

Magna-GAZ Concept

GAZ denied on April 23 an earlier report of interest in Opel. The Russian manufacturer is controlled by billionaire Oleg Deripaska, who held a stake in Magna for more than a year until his rising debts prompted a sale of the holding in October.

Magna executives held talks April 28 with German Economy Minister Karl-Theodor zu Guttenberg in Berlin. He called Magna’s concept for securing Opel’s viability “interesting” and said possible bidders would meet with GM to clarify financial data before presenting industrial plans.

The Canadian company has formulated a joint offer with Deripaska and unidentified Russian banks, a German government official said April 28. Magna’s stake in Opel wouldn’t exceed 25 percent, the aide said.

Financial investors and private-equity firms remain interested in Opel, Franz said last week, declining to discuss the approaches for fear of scaring them off.

To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net; Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net.

Last Updated: May 4, 2009 07:54 EDT