General Motors is moving closer to picking Germany's favored buyer, Magna International and its Russian partners, for its Opel business when GM's board meets on Friday, sources close to the matter said.

It's going in the direction of Magna, one of the sources told Reuters, adding GM's board would probably favor the automotive group's offer over that of Brussels-based financial investor RHJ International.

The deal could be sealed next week after final talks with the German government, the source added.

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 outcome.

Berlin and German states that host Opel plants have made abundantly clear they want Magna to get the carmaker and are set to provide 4.5 billion euros ($6.4 billion) in state aid to make it happen.

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 German states 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 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.

RHJ has presented an industrial concept as convincing as Magna's while requiring less state aid, he has said.

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.

German Economy Minister Theodor zu Guttenberg said it was too early to say Opel was saved even if 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.

GM, 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.

(Additional reporting by Maria Sheahan, editing by Will Waterman)

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