UPDATE 1-Germany's Glos says car supplier market worrying

(Adds more Glos comments, background)

BERLIN, Dec 1 (Reuters) - German Economy Minister Michael Glos said he was increasingly worried about the country's car supplier market and that an economic downturn in the sector could soon hit the German labour market.

"In my eyes the situation is alarming", Glos said on Monday after talks with representatives of the car supplier market.

Car dealers and suppliers had spoken of a downward trend that was rapidly accelerating, Glos said.

Glos did not rule out aid for the sector but did not make any specific promises.

Matthias Wissmann, head of German car industry association VDA, said he was increasingly worried that banks and credit insurers would withdraw from parts of the automobile market.

Glos agreed, saying banks were not approving credit in a way the real economy needed them to and insurers were intensifying the problem.

"It's as if someone started collecting all the umbrellas ahead of a heavy downfall," Glos said.

VDIK, the car importers' association in Germany, said sales in Europe's biggest car market had fallen at a double digit rate in November.

Wissmann said dealers and suppliers had seen orders drop by 20, 30 and 40 percent recently.

A number of executives in the automotive industry have warned that small and medium German car parts makers that rely on house banks for capital could collapse if they do not soon find access to financing.

Porsche's (PSHG_p.DE) financial chief Holger Haerter proposed last week Basel II equity requirements should be suspended at least for the time being to ease the credit squeeze facing car suppliers.

Glos said German development bank KfW would take over the major part of credit risks for medium sized companies as part of the government rescue package.

He declined to say whether there would be additional aid, saying only options on the table had been addressed at the meeting.

"We definitely want to avoid a major collapse and lasting damage," Glos said.

Calls have been rising in Europe for a broad plan to help the automotive sector.

Last month, Opel -- the German unit of General Motors GM.N -- became the first European carmaker to seek a government bailout, asking Berlin to guarantee 1 billion euros of loans for 2009.

Glos said the government had not yet taken a decision on Opel, saying only: "It's being worked on."

(Reporting by Gernot Heller, writing by Nicola Leske; Editing by David Cowell)