Canadian car parts group Magna has reached a preliminary deal with General Motors to invest in its German unit Opel, sources close to the negotiations told Reuters on Friday.

The sources said Magna and GM still had to work out details before an expected meeting later on Friday with German Chancellor Angela Merkel.

Separately, a government spokesman said a meeting with Merkel and top government officials had been pushed back until 6 p.m. (12 p.m. EDT) due to ongoing negotiations between GM and Magna.

We have an agreement in principle between GM and Magna, one source said.

The German government has been scrambling to safeguard Opel's future before its U.S. parent files for bankruptcy, a step which could come within days.

A first round of talks between Germany, the U.S. government and GM collapsed amid mutual recriminations on Thursday morning, prompting Berlin to set a new round of negotiations for Friday.

Italian carmaker Fiat, Magna's main rival in the battle for Opel, said hours before the talks were to begin that it would not participate. That left the door open for Magna, which has been in intense discussions with GM representatives for the past 24 hours.

Talks collapsed on Thursday when Washington balked at Germany's plan to temporarily place Opel assets in a trust to shield them from GM creditors. Berlin responded by refusing to release 1.5 billion euros ($2.10 billion) in bridge financing for Opel.

U.S. officials must still agree to the trust idea for a deal to work, but the preliminary pact between Magna and GM increases the likelihood that this will occur and that the German government will release the funds Opel needs to continue operations.

Based in Ruesselsheim near Frankfurt, Opel employs 25,000 staff in Germany and has been under GM's wing for 80 years.

It is part of a GM Europe operation that employs over 50,000, with car manufacturing plants in Spain, Poland, Belgium and Britain, where Opel cars are sold under the Vauxhall brand, as well as engine and parts sites such as Aspern near Vienna.

Like its parent GM, Opel has suffered acutely from the worldwide economic slowdown. Its fate is being followed closely in Germany, where the auto industry remains a potent symbol of the country's postwar recovery and export-driven economy.

Magna, started by Austrian emigre Frank Stronach in a Toronto garage nearly half a century ago, wants to use Opel to make a push into the Russian market.

It was favored over Fiat by many in the German government and may have boosted its chances by offering to help cover $500 million requested by GM during the failed late night talks.

(Additional reporting by Christiaan Hetzner in Frankfurt, Ian Simpson in Milan and Madeline Chambers in Berlin; Writing by Noah Barkin; Editing by Rupert Winchester)

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