THE GERMAN government was last night studying a preliminary agreement reached by General Motors (GM) to sell its Opel subsidiary to Canadian car parts firm Magna.

German approval of the deal, two days before GM faces a deadline to restructure or file for bankruptcy, is essential if Opel is to secure the €1.5 billion state funding it needs to keep afloat.

Talks appeared to have stalled after an all-night summit collapsed early on Wednesday morning with fresh financial demands from GM in Detroit. Yesterday morning, Opel suitors Magna and Fiat of Italy said they had made their final offers.

Fiat chief executive Sergio Marchionne said he would not participate in a second summit yesterday headed by chancellor Angela Merkel, saying it would be “over-the-top” to improve its Opel offer any further. Any further cash demands would, he said, “force Fiat to financially support Opel and expose itself in unnecessary and irrational risks”.

Yesterday afternoon, just as talks appeared to be stalled, a government spokesman announced that Magna had presented a revised concept to GM.

Talks in Berlin’s Hotel Adlon dragged on into the early evening. An insider said that the talks had improved and that there was a “sliver of a chance” of a deal.

Any deal will face tough scrutiny in other European countries with Opel and Vauxhall plants. Several EU member states have expressed concern to the European Commission that the Berlin talks would result in a deal favourable for German factories.

Ms Merkel defended her government’s efforts to rescue GM’s European subsidiary yesterday.

“Opel cannot do anything if European governments don’t take care of it,” she said in Der Spiegel magazine.

“Why should the best part of the company go under just because of poor management in the American parent company? We would look after Opel even if there was no economic crisis.”