UPDATE 2-GM board to reconsider Opel in early November

* GM board to discuss Opel deal at Nov. 3 meeting

* GM to work on labor costs, financing issues in interim

* Sale to Magna still most likely outcome - source
(Recasts first sentence, adds comments by source and by GM
CEO, adds DETROIT to dateline)

By Kevin Krolicki and Maria Sheahan

DETROIT/FRANKFURT, Oct 23 (Reuters) - General Motors
[GM.UL] will decide in early November whether to proceed with a
deal to sell its European arm Opel to a group led by Canada's
Magna MGa.TO or to seize a new opportunity to keep the unit
after seven months of grinding negotiations.

GM's chief Opel negotiator, John Smith, said on Friday that
the automaker's board of directors would reconsider the sale at
its next regular meeting on Nov. 3.

The announcement dashed expectations that the long-awaited
sale of a 55 percent stake in Opel could be signed as soon as
this week and opened the door for GM's board to set a new
course for recapitalizing its loss-making European unit.

GM emerged from a U.S. government-sponsored bankruptcy in
July with $50 billion in taxpayer funding and a new board
vetted by the U.S. Treasury that has pushed management to
reverse the long-running slide in sales in its home market.

In September, GM's 13-member board agreed to sell control
of Opel after ruling out the option of raising the $6 billion
in cash consultants said would be needed to keep the unit.

But European Union regulators have asked GM to confirm it
would make the same decision knowing that 4.5 billion euros
($6.75 billion) in state aid promised by Germany would go to
any buyer of Opel, not just Berlin's favored bidder, Magna.

German Economy Minister Karl-Theodor zu Guttenberg has
asked GM to confirm that the automaker chose Magna for business
and not political reasons.

GM's Smith said that request would now go the board, a sign
of the increased scrutiny by GM's new slate of directors.

"Given the significance of the Opel transaction, GM's board
will soon meet in its regularly monthly meeting to consider
Minister zu Guttenberg's letter and changes to the
Magna/Sberbank proposal that have occurred since its last
review on September 9," Smith said in a blog posted by GM.

Magna had no comment.

'NEVER SAY NEVER'

GM Chief Executive Fritz Henderson had expressed confidence
on Wednesday that an Opel sale would move ahead and said the
"mainstream plan" remained closing the deal with Magna.

Because of the advanced stage of negotiations and the
pressure on Opel's cash position, GM's board is most likely to
proceed with a sale to Canadian auto parts supplier Magna and
its Russian partner Sberbank (SBER03.MM), a person with direct
knowledge the GM negotiations said on Friday.

But the board could also re-examine the possibility of
keeping Opel now that German officials have been forced to
provide explicit assurances that their financial support for
Opel was not limited to Magna, according to the source, who
asked not to be named because the talks remain private.

"I would never say never," the person said about the
possibility that the GM board could opt out of the Magna deal.

GM's Smith said the company would work to resolve remaining
open issues, including labor cost reductions in coming days.

Under the Magna deal, Opel's workers would receive a 10
percent stake in the new company in return for labor cost
concessions, while GM would a 35 percent stake.

Opel's buyers originally intended to cut around 10,500 jobs
in Europe, including around 4,000 in Germany, but talks with
labor leaders have been whittling down the number of cuts.

Workers in Spain are due to vote on a preliminary deal that
would keep a plant there open at the cost of 900 jobs.
[ID:nLN191002]

UK-based union Unite has already reached an agreement with
Magna that would preserve two Vauxhall production plants and
rescue 600 of the jobs that were slated to go. Vauxhall employs
around 5,500 people. [ID:nSHA108411]

The U.K. Department for Business, Innovation and Skills
said a number of "key issues," including funding, remained
under discussion. "We are working hard towards an agreement.
We, like everyone else, want a speedy resolution, but on the
right terms," an official said in a statement.

Magna and the Russian bank have vowed to inject 500 million
euros into Opel, aiming to use it to make an aggressive push
into the Russian market.

The European Commission is keeping a close eye on the
transaction to ensure state aid is not misused for political
purposes. Magna had won Berlin's approval by proposing to keep
all four Opel plants in Germany open.

For a FACTBOX on Opel plants in Europe click
[ID:nLF606261]

For a TIMELINE click [ID:nLF568734]

For a FACTBOX with on Opel and Magna click [ID:nLG693956]
(Reporting by Maria Sheahan and Michael Shields and Kevin
Krolicki, additional reporting by John McCrank in Toronto and
Adrian Croft in London, editing by Matthew Lewis)