GM abandoned the Opel sale on Tuesday, saying improving business conditions and the strategic importance of Opel had prompted the move by its board of directors.
GM Europe will now revert to a reorganisation plan that envisions chopping fixed costs at Opel by 30 per cent, a spokeswoman said.
"Failure to reach the needed restructuring would result in the operation becoming insolvent, an unnecessary and undesirable outcome for all involved," she said.
The spokeswoman declined to say what that could mean in terms of job losses and plant closures, but German staff feared the worst.
"I don't know what is going to happen here in Bochum if Magna does not take it over," said one Opel worker arriving for an early shift at the plant.
Another Opel worker accused GM of betraying its workers.
"This arises from the mentality of American capitalism," he told a German radio interviewer.
"They used to make treaties with the Indians and then quickly break them."
Juergen Ruettgers, premier of the state of North Rhine-Westphalia, home to Opel's Bochum plant, which is seen at risk of closure, said: "General Motors' behaviour shows the ugly face of turbo-capitalism. That is completely unacceptable."
German officials, who asked not to be named, said the decision came as a surprise to Angela Merkel, the German chancellor, and her advisers during a visit to Washington, where she addressed a joint session of congress.
| Half of Opel's 50,000 staff are based in Germany [GALLO/GETTY]
Fritz Henderson, GM's chief executive, broke the news to Merkel's delegation during her meeting in Washington with the heads of the World Bank and IMF shortly before she returned to Berlin.
Senior German officials said the Opel issue did not come up when Merkel met Barack Obama, the US president, on Tuesday.
Countries with Opel plants including Germany, Britain, Spain and Belgium were originally expected to provide state aid for the rescue of loss-making Opel.
Officials in Berlin, which had originally planned to provide $6.6bn in upfront aid for the Magna bid, said they would now focus on getting back their original bridge loan rather than providing fresh financing.
British union Unite welcomed GM's move as an "incredible turnaround."
"It is the best decision for Britain and our plants," Tony Woodley, the Unite general secretary, told the BBC.
"I am absolutely delighted that General Motors have finally done the right thing for them and for us."
Woodley said there will now be negotiations with GM over plans to restructure the company. "There's no logic in breaking up the company," he said.
Peter Mandelson, Britain's business secretary, said he wanted quick talks with GM to see how the new plan would affect jobs, including at its Vauxhall plants in the UK.
In Spain, Jose Juan Arceiz, a union spokesman, said workers would try to negotiate a deal with GM as they had with Magna.
Until Tuesday's U-turn, GM's board had opted to sell a 55 per cent stake in the loss-making Opel unit to Magna and Sberbank after seven months of talks, which had included a competing bid from Brussels-listed RHJ International.