Social cost could trip up Fiat chief executive Sergio Marchionne's plans to merge his firm with Opel, then spin off and list the merged entity.

Combining with Chrysler as well as Opel, which makes up 80% of GM Europe's annual sales of US$34.4bn, fits Marchionne's strategy of bulking up Fiat to survive the crisis engulfing the auto industry, Reuters noted.

"Industrial logic-wise, Opel makes a lot more sense than Chrysler. The big hurdle we can see is social cost," Nomura International analyst Michael Tyndall told the news agency.

"It's all very well to say they compete broadly in the same markets with similar platforms and there may be economies of scale. But the broad translation of economies of scale is fewer jobs and I'm not sure if the Italian or German governments have the appetite for the job losses a merger would entail."

The biggest opposition to a deal was likely to come from German and Italian unions, according to the report.

Opel employs around 25,000 people at its factories in Germany.]

Germany's finance minister, Karl-Theodor zu Guttenberg, has said Fiat's plan was "interesting" but needed a closer look following talks with Marchionne on Monday.

Guttenberg said Fiat was seeking Europe-wide state guarantees as part of the GM Europe deal, according to Reuters.