The biggest concession is that the government may be willing to accept a bid from the Belgium-based investment fund RHJ International instead of its preferred partner, Canadian auto parts maker Magna, according to unnamed sources cited by the a mass-circulation Bild newspaper.

Last Friday GM rejected a proposal to sell a controlling 55 percent stake in Opel to Magna and the Russian state-owned lender Sberbank. The company's board was reportedly unhappy with strings Berlin attached to state funding required to close the deal.

Bild reported that Berlin may accept the RHJ bid if the fund teams up with an international partner from the car industry. The shift in the government's position followed talks in Berlin on Tuesday between GM negotiator John Smith and Jochen Homann, who heads the German government's "Opel Task Force."

Berlin has also acknowledged that it may not be possible to close a deal on Opel until after the national election on September 27.

"If it happens before then, that's good, but it has to be substantial," German Economy Minister Karl-Theodor zu Guttenberg said in an interview with public broadcaster ZDF. “What we're currently hearing from General Motors is that they're still interested in an investor solution.”

GM wants to maintain control

German Chancellor Angela Merkel and her government have played a central role in the rescue of Opel, which is currently being kept afloat with a 1.5 billion euro state bridging loan. Shortly before GM declared bankruptcy in the US in June, it transferred control of Opel to a government-backed trust, which owns 65 percent of the company while GM holds the remainder.

The German government has offered up to 4.5 billion euros worth of federal and state loan guarantees to Magna, which hoped to buy a 55 percent stake in Opel with the help of Russia's Sberbank.

Merkel and her advisors have favored Magna because they believe the company's plans will involve fewer job cuts from Opel's 50,000 workers, about half of whom are in Germany. RHJ's plans for Opel include a substantial downsizing of the auto company - something the German government had hoped to avoid in the lead-up to an election.

Now that General Motors has exited bankruptcy proceedings in the US, the company has signaled that it hopes to hold onto Opel or at least retain the option of repurchasing the company within a few years so it can maintain control over Opel's technology and small car platforms, which it plans to use in the US market.

Political football

After making concessions worth 100 million euros for a deal with Magna, unions representing Opel workers are upset by GM's change of heart and say it could lead to plant closures across Europe.

"GM's future concept of Opel envisions among other things the closing of Eisenach, Bochum or Antwerp, and beyond that dramatic cuts in personnel and capping investment," said Klaus Franz, chair of Opel's works council, in an interview with the Die Welt newspaper.

With elections just one month away, the Opel sale has also become a political football for German politicians on the campaign trail.

The center-left Social Democratic Party, which is currently the junior partner in a coalition with Merkel's Christian Democrats and is lagging far behind in the polls, is hoping to use Merkel's handling of the sale to demonstrate why she should not be given another term as chancellor.

The SPD has also made zu Guttenberg, who belongs to the CDU's Bavarian sister party, the Christian Social Union, as a target for criticism.

"I believe that Mr. zu Guttenberg also carries part of the responsibility in that he has sent very different signals towards America," said SPD economy spokeswoman Ute Berg on Wednesday.

Negotiations between GM and the German government are set to resume Friday, the state economy minister of Thuringia, Juergen Reinholz, told Bloomberg News.

bn/AP/dpa/reuters
Editor: Sam Edmonds