Magna International and Fiat have improved their offers for General Motors unit Opel ahead of a crucial week in which the German government is expected to decide which bid to back.

German Chancellor Angela Merkel will hold a meeting of top minister on Monday to review bids from Magna, Fiat as well as Belgium-listed industrial holding company RHJ International. No final decision, however, is expected on Monday.

Italian Fiat improved its offer on Saturday after top German officials said that Magna, a Canadian car parts group, submitted a better plan than its rivals. Magna has also improved its bid, a source close to the negotiations told Reuters on Sunday.

But Economy Minister Karl Theodor zu Guttenberg said on Sunday the three bids were still unacceptable because the government would shoulder too much potential financial risk. He told journalists in Berlin the bids had to be improved.

The plans are not yet at a level where we would have sufficient security, Guttenberg said. They need to be improved quite considerably. He added a controlled insolvency could not be ruled out. We obviously want to avoid that. But on the other hand we can't squander billions of euros in taxpayer money.

General Motors and the German government are in a race against time to finalize a sale of Opel, which is headquartered in Ruesselsheim near Frankfurt.

The U.S. government has given GM until June 1 to restructure its operations and prove it can be viable without state aid, or face probable bankruptcy.

The decision on who gets Opel will be taken by GM but the German government will play a big role because it would likely supply billions of euros in financing guarantees.

Fiat chief executive Sergio Marchionne addressed fears of major job cuts in Germany and said his plan did not foresee a cut of Opel's workforce in Germany of more than 8 percent, a German weekly newspaper reported.

In the worst case a maximum of 2,000 jobs would be affected by the integration of Opel into a debt-free joint venture with Fiat, Marchionne told Bild am Sonntag on Sunday.

Opel employs around 25,000 in Germany.

In a separate interview with weekly magazine Der Spiegel to be published on Monday, Marchionne also said that while there were no guarantees, he currently saw no need to close any of Opel's German sites.

Guttenberg said Fiat had improved its offer and he sensed the other bidders would sweeten their offers as well.

Bild am Sonntag reported without citing sources that Merkel opposed Magna's bid because it foresees a cut of 2,500 jobs, most of them at Opel's site in Bochum.

The city has already been hit after Finnish handset maker Nokia closed a plant there last year and politicians are wary of job cuts ahead of a general election in September.

A source close to the talks told Reuters on Sunday that Magna had addressed that issue. There are indications that Magna has improved its offer, the source said. It might be possible to build Opel's planned electric car Ampera in Bochum.

Foreign Minister and Vice Chancellor Frank-Walter Steinmeier and Guttenberg said on Friday a decision on a preferred bidder would come this week.

Guttenberg's suggestion that a structured insolvency might be the best option earned him criticism both from Opel's works council head Klaus Franz and Steinmeier.

It is incomprehensible and counterproductive to speak about insolvency when several parties were showing strong interest in Opel, Franz said in an interview to appear in Bild on Monday.

I recommend that everyone finally stops talking about an Opel insolvency. We should focus all our energy on saving as many jobs at Opel as possible instead of unnecessarily stirring up fears, Steinmeier said.

Franz also appealed to the bidders to refrain from making promises they could not keep. Remarks on job cuts need to be guaranteed and put down in writing and remain valid for several years not just for two days, Franz told the paper.

(Reporting by Nicola Leske in Frankfurt, Klaus-Peter Senger and Andreas Moeser in Berlin; Editing by Dan Lalor)

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