Fiat linked to deal to buy Vauxhall and Opel

Sources close to GM were last night downplaying claims from a German state minister that Fiat is in the running to buy the beleaguered US car giant's European business.

Hendrik Hering, minister for the economy for Rhineland-Palatinate, confirmed the welter of rumours putting the Italian company alongside Magna International, the Canadian automotive parts group, as the foremost bidders for the business that includes Opel in Germany and Vauxhall in the UK.Several other potential investors are also reportedly looking at GM Europe.

Fiat and GM Europe both declined to comment yesterday, but sources said the speculation should be taken "with a huge pinch of salt".

Fiat's first-quarter results yesterday reported a €360m (£322m) pre-tax loss and net debt of €6.6bn. The Italian company is already in talks with Chrysler, one of the other failing US behemoths, about a potential tie-up. The final terms of the deal are still being negotiated but must be finalised by next Thursday, at which point the US government will either accept a restructuring plan or force Chrysler into bankruptcy.

At Fiat's results conference yesterday, Sergio Marchionne, the chief executive, said the company is committed to the US plan. "Based on what I know today, I see no reason why this should not happen and I can only confirm our unwavering commitment to get this transaction done," he said.

GM is trying to save its core US business by selling off the European operations. The unit's Saab business is being spun out, with the help of the Swedish government, after the company warned in February that it would run out of money within weeks without state help. It has asked for €3.3bn of government aid to help woo potential investors for the rest of the company, in which it would hold only a nominal stake.

Although discussions in Europe focus on Germany, which is home to three of the subsidiary's main manufacturing operations, the UK's Vauxhall marque contributes a quarter of GM Europe's business. Vauxhall employs 3,400 people, the majority of them at the company's Ellesmere Port factory.