German Chancellor Angela Merkel said on Saturday that General Motors must improve the rescue plan for its German unit Opel if it wants government support for the struggling carmaker.

Merkel has told party members that Opel is not systemically crucial to the German economy, and weekend reports suggested her government would not inject any cash directly into the firm.

We'll help if the positives for everyone outweigh the negatives, Merkel said in her weekly podcast. The (rescue) plan still needs to be improved and clarified.

GM has been hit by a global sales slump and it said on Thursday its auditors had raised substantial doubt about its ability to survive outside bankruptcy if it fails to stem its losses and stop burning cash.

German Interior Minister Wolfgang Schaeuble said in an interview published on Friday Opel should not rule out an insolvency filing.

Economy Minister Karl-Theodor zu Guttenberg said in an interview published on Saturday there had been too many calls for state intervention and that if firms applied for insolvency it did not necessarily spell their demise.

If the business model is suitable for the future, an insolvency can also help to retain jobs, he told weekly magazine WirtschaftsWoche. Our insolvency law gives firms the chance to write off debt and continue operations.

Merkel, Schaeuble and Guttenberg are all conservatives, and leading Social Democrats (SPD) -- who rule in coalition with their rivals -- have stressed their desire to save Opel if possible as Germany heads for a federal election in September.

Foreign Minister Frank-Walter Steinmeier, who will lead the SPD's challenge against Merkel in the election, told paper Bild am Sonntag that raising the prospect of insolvency was irresponsible and only spread fear among the public.

Berlin should work with Opel and the federal states where the firm has plants to draw up its own rescue plan, he said.

I know from experience that in these situations you're most likely to get results if you bring the decisive players around the table and work together on a plan, Steinmeier said.

STATE STAKE RULED OUT

Yet even in the SPD, there are doubts about Opel.

Axel Berg, an SPD member of the lower house of parliament's economics committee, said insolvency should remain an option.

We can't expect the taxpayer to put up with (us) just carrying on as before: pumping in state funds to perform a sort of care for the dying, so that the corpse is carted to and from the graveyard and not buried until later, he told Reuters.

GM Europe submitted a rescue plan for Opel last week under which the German unit along with UK-based Vauxhall Motors would be partly spun off from its parent. It said the independent unit needs 3.3 billion euros ($4.17 billion) in state aid.

German weekly magazine Der Spiegel said on Saturday that Opel was threatening to close its German plants in Eisenach and Bochum as well as its Belgian site in Antwerp.

Citing documents it said Opel had submitted to the German government, the magazine said this scenario would lead to 20 percent of the company's 55,000 staff in Europe being laid off.

An alternative plan involved the loss of only 3,500 jobs -- providing wage concessions were made, it added.

Without providing sources, Der Spiegel also said the German finance and economy ministries rejected directly injecting cash into Opel and that they agreed that any support should be restricted to guarantees, or at most loans to the firm.

Junior Economy Minister Dagmar Woehrl told weekly magazine Focus she ruled out the state taking a stake in Opel.

(Editing by Mike Peacock)

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