Canadian auto parts maker Magna is in pole position in the race to take over struggling General Motor's German subsidiary Opel, a key local politician said yesterday.

Magna's offer "responds best to the needs" of the public authorities and the workers, said Roland Koch, Premier of the state of Hesse, where Opel's headquarters are situated.

On the other hand, Fiat's bid is "a long way" from what authorities had hoped for, Mr Koch said.

The third bidder in the race, RHJ International, has placed a "very interesting" offer, he added.

The German government is expected to announce its preferred bidder early this week.

The final decision on Germany's Opel, as well as other units of GM's European operations, including Britain's Vauxhall and Sweden's Saab, lies with GM itself and the US government, but Berlin will sweeten any deal with loan guarantees.

Magna and RHJ were expected to ask for €5 billion in guarantees while Fiat is thought to be requesting €7 billion.

The Canadian firm is also in pole position with GM, according to press reports.

German magazine Der Spiegel, citing internal GM documents, said in one of its online editions that Magna was favoured because of its technological know-how, having helped develop the all-terrain BMW X3 model.

The fate of Opel, an industrial icon dating back to the 19th century and which directly employs around 25,000 people in Germany, has become a hot-button political issue with barely four months to go until general elections.

Chancellor Angela Merkel, up for a second term in the September 27 vote, is prepared to pull out all the stops to save Opel from collapse but being seen as writing a blank cheque on behalf of taxpayers could hurt her re-election hopes.