The fate of Opel hangs in the balance as General Motors is poised to pick a buyer for the European carmaker after months of negotiations.

GM's board of directors could recommend either Canadian carmaker Magna's bid for Opel or that of Brussels-based financial investor RHJ International .

Sources close to the matter have told Reuters the board will address the topic later on Friday.

The U.S. carmaker, which emerged from bankruptcy protection on July 10, this week agreed to sell its Saab car business to a tiny Swedish luxury carmaker, the first in a series of big sales the U.S. group is planning as it slims down.

Talks to sell Opel have lasted for months and have become a political hot potato ahead of German elections in September because a deal will entail billions of euros in aid from European governments as well as thousands of job cuts.

German Chancellor Angela Merkel and the German states that host Opel plants have come out clearly in favor of the Magna offer because they think the Canadian automotive group's expertise can save more of the 25,000 Opel jobs in Germany.

Magna's co-CEO Siegfried Wolf said last week that the Canadian company and its Russian partner Sberbank had reached an agreement in principle with GM over a contract to buy 55 percent of Opel, raising hopes of a deal.

But GM's top negotiator for the Opel deal, John Smith, has repeatedly cited the positive aspects of RHJ's offer, which he says would be easier to implement than Magna's plan.

The field of bidders narrowed to two when Italian carmaker Fiat and China's Beijing Automotive (BAIC) dropped out.

Merkel reiterated in an interview with a German newspaper her preference for Magna's offer and said she was very skeptical about the prospects for RHJ. [ID:nBAT003108]

In a last-ditch effort to push for Magna's bid, Germany has also offered to provide 4.5 billion euros ($6.4 billion) in state aid for Opel, without waiting for other European countries to chip in, if GM chooses Magna.

Opel trustees who oversee a majority stake in Opel have to approve any decision. Billions of euros in aid from European countries with Opel plants are riding on the decision.

German Economy Minister Theodor zu Guttenberg said it was too early to say Opel was saved even the sale process wraps up quickly.

In my view you will be able to celebrate the rescue of Opel only when it is clear that Opel has established itself as a competitive company on global markets, he told the Financial Times Deutschland newspaper, adding this would certainly not be the case in the next few weeks or months.

(Reporting by Maria Sheahan; editing by Simon Jessop)

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