The German government is set to name a preferred bidder for General Motors' cash-strapped European operations, paving the way for one of the biggest state-supported industrial bail-outs in the country's history.

Angela Merkel, German chancellor, will tomorrow meet top officials from the US, General Motors and the bidders for GM's European units Opel and Vauxhall. The three bidders in the running are Italian carmaker Fiat, Canadian car parts group Magna and Belgium-based financial investor RHJ International.

The successful bidder will get access to between €5bn and €7bn ($7bn and $9.8bn) in state guarantees. The German government also wants to strike a binding agreement with GM and the US Treasury on shielding Opel/Vauxhall from an insolvency filing of the US carmaker.