The board of General Motors Co began meeting in Detroit on Tuesday as the German government stepped up pressure on the automaker to clarify its long-term plans for its European Opel operations.

The board meeting coincided with a warning that the cost of keeping Opel could run $1.45 billion higher than an overly optimistic projection prepared by GM in June GM, which emerged from bankruptcy under U.S. government ownership in July, has been in intensive negotiations with two bidders to sell control of Opel and its British affiliate, Vauxhall, since May.

But last month the newly appointed GM board declined to endorse a plan to sell the operations to a group led by Canadian auto-parts group Magna International that has the backing of Germany's government.

Instead, the 13-member board asked GM management led by Chief Executive Fritz Henderson to return with more information on two alternatives to the Magna deal.

Specifically, the board asked for renewed consideration of a sale to Brussels-listed RHJ International or a third option that would see GM keep Opel by raising the billions of dollars needed for its restructuring, sources familiar with the deliberations have said.

In a report presented to the GM board, adviser KPMG said that GM would face an additional cash need of up to $6.1 billion to keep Opel.

GM had previously estimated that it would need $4.65 billion in cash to keep Opel and repay a roughly $2 billion bridge loan from the German government, the report said.

A copy of the report was obtained by Reuters.

KPMG had no comment. A GM spokeswoman could not be reached for comment.

With some 25,000 German jobs directly at stake and an election looming at month end, the slow progress toward a resolution of the Opel situation has been met with mounting frustration by German government officials.

'We are keeping Opel' is not a strategy yet, German Deputy Economy Minister Jochen Homann said on the sidelines of an energy conference in Munich on Tuesday.

GM's board of directors began a two-day meeting on Tuesday to discuss Opel, which ranks as the second-largest brand behind only Chevrolet for the still-struggling automaker.

Berlin wants a decision ahead of the Frankfurt car show starting next week, where Opel will unveil the latest version of its most important model, the Astra compact.


GM consented in May to a Magna deal but gradually retreated from that position after emerging on July 10 from a fast-track bankruptcy funded and sponsored by the U.S. Treasury.

Part of the concern over the Magna deal at GM reflects the risk that the transaction could undermine the automaker's plans for faster-growing European markets led by Russia and put key technology at risk of leaking to rivals, people familiar with the deliberations have said.

The Magna plan involves an equity stake for the Russian bank Sberbank and an industrial partnership with Russian automaker GAZ Group .

In addition, GM depends on Opel's engineering for key model launches such as the upcoming Chevy Cruze small sedan that are crucial to its effort to meet tough fuel-efficiency standards and rising U.S. consumer demand for smaller vehicles.

GM's board indicated last month that it was leaning toward a deal that would allow it to keep Opel as closely integrated to its operations as possible, sources have said.

Keeping Opel outright would involve raising funds to cover a roughly $2 billion (1.5 billion euro) bridge loan extended by the German government and the costs of restructuring the money-losing operation.

Germany has ruled out aid to help GM keep Opel after throwing its weight behind Magna.

The German government has made it clear on repeated occasions that state aid depends on a solution with an investor, a spokesman for the Economy Ministry said.

But some analysts expect GM's board to keep that option open because of the prospect of deeper savings from sharing technology and parts with its U.S. and Asian operations.

GM's European unit lost $2.8 billion in 2008 as the global auto market contracted and its U.S. operations skidded toward bankruptcy.

GM has said repeatedly the RHJ offer would be easier to implement than the Magna plan for Opel that Germany backs.

RHJ raised the stakes last week by sweetening its offer. The Belgian-listed financial group would pay slightly more and need substantially less state aid, letting it return taxpayer money a year sooner than initially estimated.

Given the complications, many analysts believe GM will hold off on a decision until after the German election on September 27, which is likely to produce a new center-right government.

This would avoid embarrassing conservative Chancellor Angela Merkel and her left-leaning coalition partners, the Social Democrats, ahead of the vote.

($1=.7028 Euro)

(Reporting by Vera Eckert, Christiaan Hetzner, Angelika Gruber and Kevin Krolicki, editing by Will Waterman and Matthew Lewis)