Meanwhile, sources say that bankruptcy is far from certain in the GM restructuring case, and reports that the Obama administration will steer the automaker into bankruptcy as early as this week are premature. Citing a source familiar with the situation, the news association Reuters reported on Friday that negotiations will likely continue right up to the May 31 deadline. In addition, the sources pointed out that the Chrysler case, where the process continued until the deadline, would serve as a good comparison.

Magna International appeared to gain the early edge Friday in the race to buy Opel, surpassing rival bidders Fiat and RHJ International Inc.. German officials said they were leaning toward the offer submitted by the Magna, a Canadian car parts group, because its plan would leave open four manufacturing plants located in that country. With Federal elections looming in September, any merger plan containing the possibility of massive job losses would appear to be dead on arrival. German government officials, who prefer to remain anonymous, said the Magna offer was gaining significant support in Berlin. GM will make the final decision on who ultimately prevails in the battle for Opel, but the German government will have a say because it is seen as the likely source of financing guarantees for the eventual winner.

Bloomberg News reported that even though the Chinese automaker submitted a letter expressing interest in purchasing Opel a day after the May 20 deadline for bids, a concrete offer may not be forthcoming. Yu Bing, an analyst at Ping An Securities in Shanghai told Bloomberg that the risks were huge and that Chinese carmakers aren’t big or experienced enough and lack the technology and management skills to buy something like Opel. Bloomberg reported that, according to GM, Opel needs $4.6 billion (3.3 billion euros) in new government financing to survive. The carmaker is selling a majority stake in its European operations while preparing for a probable government-forced June 1 bankruptcy. The Magna and RHJ bids include cash, while Fiat’s calls for $9.8 billion (7 billion euros) of financing.

Fiat’s bid is two-pronged: It contains an offer for the Opel and Vauxhall units, and alternatively offers to also buy GM’s operations in Brazil and Argentina. The Fiat Chief Executive Officer Sergio Marchionne aims to create the world’s second-largest car company, second only to Toyota Motor Corp  by combining Fiat and Opel with Chrysler and GM Europe and possibly GM’s Latin American operations. Magna’s primary interest in Opel centers around increasing sales in Russia to about 1 million units, GM Europe CEO Carl Peter Forster said last week in a Bloomberg interview. Opel, which is headquartered in Ruesselsheim, near Frankfurt, and traces its roots in Germany back to the 19th century, has manufacturing facilities in St. Petersburg and Uzbekistan, which could accelerate growth in the two countries. Magna’s plan has also gained favor because it will keep the existing European management team in place.

Decades of bad decisions, from expensive compromises with their unions, ignoring the need to manufacture fuel efficient cars, and consistently bad design decisions, along with strong competition from Japanese, Korean and other foreign automobile manufacturers, have badly wounded their ability to compete in today’s market place.

Government assistance is needed for them to not only get viable again, but to actually stay in business, and they have no choice but to have to play under the government’s new rules. Climate change legislation is on the horizon, and President Obama is fully committed to force the American car makers to join the new reality. They must produce fuel efficient cars for the American consumer.

For an in depth look at the new reality facing Detroit read John M.Broder and Micheline Maynard’s article in Wednesday’s New York Times.

This once proud company, a pillar of American industry, is probably on the verge of declaring bankruptcy. Its new chief executive, Frederick A. Henderson, declared as much on Tuesday, while still hoping that he could restructure the company out of court.

Mr. Henderson, successor to Rick Wagoner, who had to resign at the request of President Obama over the weekend, hopes to recreate General Motors as it once was, an enterprise that can compete and win in the marketplace.

Head to this NY Times article for more…..