Fiat boss Sergio Marchionne met German ministers to tout what he called a "marriage made in heaven" to create a new behemoth with revenues of €80 billion ($106 billion) making between six and seven million vehicles every year.
“I accepted the plan and it will now undergo the proper assessment,” German Economy Minister Karl-Theodor zu Guttenberg said.
The new firm, which Marchionne wants to see quoted on the stock exchange, would be second only to Japan's Toyota, bigger than General Motors and Ford and around the same size as Germany's Volkswagen, Europe's biggest automaker.
Under one roof would be Fiat, GM's Opel, Vauxhall and Saab units, and the fallen US giant Chrysler, in which Fiat agreed last week to take an initial 20 percent, rising to 51 percent if Chrysler paid back massive state loans.
It would make everything from gas-guzzling Jeep sports utility vehicles in the United States to Opel's mid-range Astras and Insignias and the Italian firm's tiny and successful Fiat 500 – a classic design from the 1950s.
Germany's Opel forms the core of GM's European operations, and Marchionne needs the approval of Chancellor Angela Merkel's government in Berlin for any deal to go through – something that Marchionne wants in 30 days.
Fiat has offered around €1 billion ($1.3 billion) for Opel, a member of the works council at Opel's factory in Bochum in western Germany, Rainer Einenkel, told AFP.
GM has been trying for some time to offload a majority stake in Opel and the German government might be prepared to sweeten any deal by offering state-backed guarantees on its loans.
In March, GM Europe executives presented Berlin with a restructuring proposal that includes €3.3 billion in public aid from Germany and other European countries where it has factories.
GM has 55,600 employees in Europe including 26,000 at Opel in Germany, and with September elections fast approaching Merkel is keen to avert a collapse of the firm, an industrial icon dating back to the 19th century.
But Economy Minister Karl-Theodor zu Guttenberg and Foreign Minister Frank-Walter Steinmeier – whom both met with Marchionne on Monday – could still need more convincing.
Guttenberg said Fiat's offer was an “interesting concept” that still needed to have its tyres kicked. He said Marchionne had committed Fiat to keeping the Opel brand and its three assembly plants in Germany after any takeover. While that would be good news for Opel workers in Rüsselsheim, Bochum and Eisenach, it could mean the carmaker's parts factory in Kaiserlauter could face closure.
Steinmeier told a news conference Monday that he had not yet been given details on Fiat's offer and that the Italian firm was only one of several interested parties.
"It is not decision time yet. Interested parties first have to fine tune their plans and then hopefully we will come to decisions in the coming weeks," Steinmeier said.
Germany's powerful trade unions are also sceptical, with IG Metall chief Armin Schild telling the Tagesspiegel newspaper that he opposed a deal with Fiat.
Opel "would not be strengthened but weakened and the domination over Opel would not end, it would be moved from Detroit to Turin (Fiat headquarters)," Schild said, preferring a tie-up with Canadian auto parts maker Magna.
Willi Dietz, professor at the Automobile Industry Institute in the southwestern German town of Geislingen, said that unions are in for disappointment.
"Opel has capacity to spare. Any investor will cut jobs," Dietz told AFP.
In Britain, trade union United also voiced its opposition to Vauxhall being taken over by Fiat, saying it would be an "unmitigated disaster" that would cost jobs, the BBC reported.
If Marchionne's vision becomes reality, Fiat would emerge as one of the winners of the global recession by seizing advantage of the devastating crisis that has engulfed the Detroit "Big Three" car makers since last year.
Chrysler, the 90-year-old number three US auto maker, filed for bankruptcy last Thursday, crushed under a mountain of debt and dealt a fatal blow by the dizzying slump in the number of cars being bought worldwide.
The once mighty GM, until recently the world's biggest car maker, is not far behind and analysts expect the firm to follow Chrysler's lead and throw in the towel soon.