A radical overhaul of the car industry moved a step closer on Monday as Fiat's chief executive set his sights on General Motors' Opel German unit just four days after clinching a deal with Chrysler.

Sergio Marchionne sought government support for an ambitious plan to swallow up GM's European operations to create a listed European automotive giant, while debate over the ownership of Germany's Porsche AG intensified.

Germany's finance minister, Karl-Theodor zu Guttenberg, said Fiat's plan was interesting but needed a closer look following talks with Marchionne. Guttenberg said Fiat was seeking Europe-wide state guarantees as part of the GM Europe deal.

Fiat shares rose 7 percent by 1320 GMT (9:20 a.m. EDT) as the market welcomed the prospect of a spin-off.

In fresh reminders of the dire state of the global auto industry, French new passenger car sales fell 7 percent in April

and Belgium reported a 22.8 percent drop.

Spanish automaker association Anfac said car sales in the country fell 45.6 percent in April, declining faster year-on-year than in March, which saw a 38.7 percent drop.

The spin-off of the auto group has always been an option prized by the market because it brings out the stand-alone value of the auto business without the built-in discount that comes from a conglomerate like Fiat, Cassa Lombarda analyst Serge Escude said.

SURVIVAL PLAN

Combining with Chrysler as well as Opel, which makes up 80 percent of GM Europe's annual sales of $34.4 billion, fits Marchionne's strategy of bulking up Fiat to survive the crisis engulfing the auto industry.

In Detroit, Chrysler asked the U.S. Bankruptcy Court for a swift hearing into its planned sale to Fiat, a proposal that brought immediate objections from some secured lenders.

Marchionne has said carmakers need to make over 5 million vehicles a year to make a profit.

Germany's Guttenberg said he did not expect a final decision on the future of Opel to come out of his meeting on Monday with Marchionne. Opel employs around 25,000 people at its factories in Germany.

The biggest opposition to a deal is likely to come from German and Italian unions, fearing synergies to be extracted from a merger would lead to job cuts and plant closures.

Industrial logic-wise, Opel makes a lot more sense than Chrysler. The big hurdle we can see is social cost, Nomura International analyst Michael Tyndall said.

It's all very well to say they compete broadly in the same markets with similar platforms and there may be economies of scale. But the broad translation of economies of scale is fewer jobs, and I'm not sure if the Italian or German governments have the appetite for the job losses a merger would entail.

Fiat and Opel would merge their small B and mid-size C segment car platforms, absorbing Fiat's ultra-small A platform and Opel's upper-middle D platform, the Financial Times said.

As well as Fiat, Austrian-Canadian car parts maker Magna has expressed an interest in Opel. Magna declined to comment on Monday.

The works council head of Opel said last week other investors were interested in the unit.

BATTLE FOR PORSCHE

In Germany, Focus magazine reported on Saturday that the Porsche and Piech families, which control Porsche Automobil Holding SE, were set to decide on a possible sale of Porsche AG and its eastern European dealer network to Volkswagen in a move to cut Porsche's holding company's debt.

But Wolfgang Porsche, head of Porsche's supervisory board told the Frankfurt Allgemeine Sonntagszeitung (FAS) on Sunday that Porsche would not be sold to Europe's largest carmaker.

Volkswagen shares were down 2.28 percent at 1320 GMT (9:20 a.m. EDT), while the DJ Stoxx European Autos index was up 0.77 percent.

($1=.7528 Euro)

(Reporting by Gernot Heller, Ian Simpson, Erik Kirschbaum, Tyler Sitte, Avril Ormsby, Andrew Hay, Soyoung Kim, Jason Webb and Angelika Gruber; Writing by Helen Massy-Beresford; Editing by John Stonestreet and David Cowell)

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