GM bankruptcy, Opel decision seen near

By Kevin Krolicki and Madeline Chambers

DETROIT/BERLIN (Reuters) - General Motors Corp moved closer to filing the largest bankruptcy ever for a U.S. industrial company after a crucial bond exchange proposal failed and as officials in Germany neared a decision on which company would take over GM's European brand Opel.

At the same time, bankrupt U.S. automaker Chrysler faced a key court hearing expected to clear the way for Fiat SpA to take control of its best assets on the fast-track schedule set by President Barack Obama's administration.

Less than a month after it filed Chapter 11, Chrysler is seeking approval to sell its stronger operations to a "New Chrysler" owned by Fiat, labor unions and the U.S. and Canadian governments, in exchange for $2 billion paid to lenders.

The court hearing into the Chrysler sale is set to continue Thursday in New York.

With the Chrysler case nearing conclusion, attention was shifting to the complications expected from GM's bankruptcy -- expected within the next few days -- and the sale of Opel.

In the wake of the rejection, GM's board was expected to meet this week to consider the dwindling options available to the embattled automaker after a controversial attempt to restructure $27 billion in bond debt failed overnight.

The U.S. government-brokered bankruptcy for Chrysler has been seen as something of a test case for the more complex and larger filing expected from GM in the next few days.

In Europe, Fiat was also in the race to win control of Opel, part of Chief Executive Sergio Marchionne's ambitious attempt to cobble together an automotive alliance that could rank as the world's second-largest by sales.

The German government was considering offers for Opel from Fiat, Canadian auto parts company Magna International Inc, Belgium-listed holding RHJ International SA and China's Beijing Automotive Industry Corp.

Germany aims to close in on a deal to provide Opel with temporary financing if, as expected, GM is forced to file for bankruptcy in the United States.

While a final winner is not expected to be selected on Wednesday, the German government is expected to narrow the field of bidders.

BOND DEAL FLOPS

Selling off its Opel business was identified as a major priority by GM as it neared the end of this month. The bond exchange was another.

GM said in a statement that an offer to exchange $27 billion in bond debt for a 10 percent stake in a reorganized company by a midnight deadline had fallen far short of the target set in consultation with the Obama administration.

GM said in a release that "substantially less" than the 90 percent threshold had been tendered and none of the exchange offers would be accepted.