UPDATE 2-Germany says results, not speed, key in Opel deal

* Chancellor Merkel still expects to reach a deal with GM

* Bild reports Berlin gives condition for rival RHJ bid

* Fiat's interest in Opel has not changed - source
(Recasts, adds comments from source on GM board, background on
Opel, comments from German economic minister)

By Thorsten Severin and Christiaan Hetzner

BERLIN/FRANKFURT, Aug 26 (Reuters) - The German government
signaled on Wednesday talks between Berlin and General Motors
[GM.UL] over the fate of its European unit Opel are threatening
to drag on, raising the prospect of weeks more of negotiation.

Talks to sell Opel have been running for months and loom as
a hot political issue ahead of German elections in September,
because of the state support required for the eventual buyer.
[ID:nL052558]

Opel has been surviving on a six-month 1.5 billion euro
($2.15 billion) bridge loan from the German government that is
due to mature at the end of November, when a new investor has
been expected to take control.

Absent a deal to roll over that debt or pay it down, Opel
could face insolvency.

GM's board is not expected to convene again until early
September when the Opel issue will be discussed again.

But a final resolution on Opel could be postponed again
until after German elections in late September, according to
one person close to the sale process who was not authorized to
discuss the matter publicly.

Although GM would still prefer to find an investor for
Opel, the automaker's new board is leaning toward a solution
that would allow GM to maintain more control, the person said.

"It becomes more and more apparent that GM is trying to
hold Opel as closely as possible. GM wants to have maximum
flexibility as to the potential of keeping Opel," the source
said.

Although GM's European operations posted a $2.8 billion
loss last year, Opel represents the heart of GM's small and
mid-size car engineering and provides the technology behind key
models such as the Chevy Malibu and the upcoming Chevy Cruze.

Opel has drawn down just over 1 billion euros -- or
two-thirds -- of its German bridge loan to date, Ute Berg, who
represents the German Social Democrats on economic matters,
told reporters on Wednesday.

GM had originally planned to sell a controlling stake in
Opel to a consortium led by Canadian auto parts supplier Magna
MGa.TO, but GM began to back away from that option when the
U.S. carmaker emerged from fast-track bankruptcy proceedings
just five days before the July 15 target. [ID:nLD679597]

Even after Magna submitted a 600-page contract backed by
German loan guarantees, the board of now state-owned GM shocked
Berlin by refusing to approve the deal last Friday.

Part of GM's concern has centered on the potential for
Magna's Russian partners Sberbank SBER03.MM and automaker GAZ
to use GM technology to develop a competitive threat to its own
Chevy brand in the Russian market.

Brussels-listed RHJ International, which focuses on
investment in autos and Japan, is the remaining rival bidder.

Chancellor Angela Merkel of the conservative Christian
Democrats told German TV that she still hoped for a quick
decision in favour of Magna, but the deal had to be sound.

"Content must come before speed. We will clear up the
issues that still need to be resolved ... I think there is a
good chance that in the end we will come to an agreement," she
told the N24 news channel.

Since the U.S. government said it will not finance GM's
international operations, Merkel said GM would then be
dependent on European aid if it wants to keep Opel afloat.

German Economy Minister Karl-Theodor zu Guttenberg told
reporters at a parliamentary budget committee meeting in Berlin
that there was no clear date now for an Opel decision.

An agreement will come "when an agreement can be made that
holds," he said.

Worker representatives, like Armin Schild of the IG Metall
labour union, fear insolvency as the alternative to a deal.

"I believe there are supporters at GM for three different
concepts. The first want Magna, the second RHJ (RHJI.BR) and
the third insolvency. That's why the company is paralysed:
there is always two-thirds majority against each concept," the
trade unionist and non-executive Opel director told Reuters.

POKER TACTICS

Meanwhile, Italy's La Republicca published a report
reviving the interest of Fiat (FIA.MI) in Opel. A deal is seen
as highly unlikely since the Italian carmaker pulled out of the
bidding in May.

"As our chairman and CEO have said many times, our proposal
for Opel stays the same. We don't intend to modify it," a
source at Fiat told Reuters.

Earlier, leading German tabloid Bild reported that the
German government might be willing to drop its opposition to
RHJ should the investor team up with an independent, strategic
partner in the auto industry.

On Monday, sources told Reuters that GM was considering an
alternative that would see the automaker inject billions into
Opel to hold on to the company.

That approach would require raising some $4 billion, a
possibility since GM's bankruptcy has been completed and there
is growing confidence that the worst of the credit crisis and
auto sales slump had passed, some analysts said.

GM has $11 billion in U.S. debt but came out of bankruptcy
with some $20 billion in cash from federal funding.

Guttenberg said it could be difficult for GM to come up
with the amount of money it needs to hold on to Opel.

"To come up with such a not-insignificant sum after a
Chapter 11 proceeding -- that's a big chunk," he said.

"One would have to look perhaps for support from the
American government, which I believe would be holding back
after AIG and other experiences."

To read a scenario on outcomes please double click on
[ID:nLQ696362]

To read a dealtalk on GM, please double click on
[ID:nN25223223]
($1=.6983 Euro)
(Additional reporting by Angelika Gruber and Peter Dinkloh in
Frankfurt and Gianni Montani in Turin, Soyoung Kim in Detroit;
editing by Will Waterman, Erica Billingham and Matthew Lewis)