Talks over the sale of General Motors' European operations acrimoniously collapsed Thursday throwing up a new obstacle to the US auto giant's efforts to avoid bankruptcy.

A New York court was also to hold new hearings Thursday on Chrysler's bankruptcy application to lay on a rescue operation by Fiat of Italy as the world auto industry remained deep in torment.

The German government angrily accused GM of using "scandalous" negotiating tactics during all night talks on the sale of European affiliates Opel and Vauxhall.

Fiat and Canadian auto parts maker Magna International remained in the race for Opel after a third bidder, investment firm RHJ International pulled out. Beijing Automotive Industry Holding of China has also made a late bid.

Germany has offered billions of euros in soft loans to whoever takes over Opel. German officials blamed the talks breakdown on a last-minute request from GM for an extra 300 million euros (415 million dollars) of funds for Opel.

German Finance Minister Peer Steinbrueck said: "We were unpleasantly surprised when this new demand came out of the blue at 8:00pm local time. We found that pretty scandalous.”