It doesn't look to be going well for General Motors Company (NYSE:GM)' management in Europe.

Earlier this week, GM Vice Chairman Steve Girsky kicked off a return to negotiations with German labor leaders by floating a plan (or perhaps making a threat) to close a German factory in 2014, instead of in 2016 as originally agreed.

The union's response? Forget it. "Unacceptable," said the union's leadership in a statement. And as for GM's ongoing demand to cancel planned wage increases in the face of massive, ongoing losses: "[The union] cannot and will not ever agree to that." And the union won't shy away from a fight; its coffers are flush and ready to withstand protracted strikes if needed, and Germany's labor laws give it many advantages.

Well then. GM's list of options would appear to be getting rather short.

Protracted problems defying easy solutions The problems with GM's German subsidiary Opel are complex, but the basic facts of the situation are easy to grasp. Opel hasn't been competitive for years – it has lost over $17 billion since 1999. GM's post-bankruptcy leadership has been determined to make it profitable, but restructuring efforts have fallen short as deep recessions have driven auto sales in Europe to a near-two-decade low.

When GM reports full-year 2012 earnings next month, it's expected that Opel's losses will total something in the neighborhood of $1.5 billion. There will be more losses to come, too: Even the optimistic case for Opel's current trajectory doesn't see break-even happening before 2015. And realistically, it may take considerably longer – especially if GM is unable to make deeper cuts like the ones Ford Motor Company (NYSE:F) is making to cure its own Europe ills.

Drastic action seems more and more likely. Analysts and industry-watchers have speculated for a while that GM's real plan for Opel – or at least, its plan of last resort – may involve throwing the subsidiary into bankruptcy. Last month, a German business newspaper reported that Opel had sold six of its factories to GM in exchange for a loan extension, a move that suggested that GM was girding for a bankruptcy filing.

If the union is really unwilling to play ball – and not just talking tough in public for negotiation purposes – an Opel bankruptcy could happen sooner rather than later.

An abrupt twist to a so-far incremental effort While any bankruptcy would be limited to Opel, rather than GM proper, such a move would throw all sorts of wrenches into GM's European turnaround plans. First, it would likely be very unpopular in Germany, where no auto factory has closed since the 1940s. Second, it could affect the ongoing arrangement between GM and French automaker PSA Peugeot Citroen , even as the two announced on Thursday that they would proceed with several joint model development programs.