Canadian auto parts maker Magna

has increased the amount of upfront capital it will inject in its offer for General Motors' European unit Opel, a German government source said on Tuesday.

Magna is now offering 350 million euros of its own capital immediately, said the government source, who is familiar with talks to find an investor for Opel, adding: Furthermore, there should be a 150 million euro convertible bond.

Magna originally wanted to invest just 100 million euros ($142.8 million) of capital in Opel in two tranches of 50 million euros, sources involved in the negotiations said, along with another 400 million in convertible debt.

The Canadian group's improved offer comes after the German government criticized the amount of their own capital all three bidders for Opel planned to inject into the carmaker.

GM and the German government, which is being asked to provide Opel with loan guarantees, have been considering offers from a consortium of Magna and Russia's Sberbank, from private equity firm RHJ International, and a third from China's Beijing Automotive (BAIC).

However, GM's European business said last Thursday it had agreed to continue detailed talks with Magna and RHJ. It did not mention BAIC in a statement on further talks.

The German government has expressed a preference for Magna's bid, while sources involved in the negotiations say GM favors RHJ's offer.

The endgame of the battle for control of Opel will likely play out in the Opel Trust, which has been responsible for Opel since GM entered bankruptcy in June, if the German government and 35 percent shareholder GM cannot agree on an investor.

The Trust holds 65 percent of Opel shares.

The Opel Trust's board is comprised of two General Motors representatives and two for Germany, one for Berlin and a delegate for the four federal states in which Opel has a plant. A fifth neutral board member has no vote.

Magna wants to expand Opel's full-scale car assembly business and forecasts high growth rates, particularly in Russia, home of consortium partner Sberbank.

RHJ aims to shrink production to return Opel to profit and may be open to selling it back to GM at a later date.

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