* GM says Opel not for sale despite Fiat's reported interest
* Opel executive says aims to source more parts from PSA, not GM
* US legal requirements mean GM car parts expensive
(Adds comments from Opel executive in paper)
FRANKFURT, Oct 5 (Reuters) - General Motors Co said on Friday its European brand Opel was "vital" for GM's future in Europe, dismissing once again speculation it might sell the company should an alliance with French carmaker PSA Peugeot Citroen collapse.
GM has thrown its weight behind a restructuring of its loss-making German business, rather than opt for a sale or closure urged by some U.S. investors.
The U.S. company is pinning its hopes instead on expanding an alliance with former rival Peugeot beyond logistics to include joint procurement and vehicle development.
Earlier on Friday, Italian daily Il Sole-24 Ore said in an unsourced report that Fiat SpA Chief Executive Sergio Marchionne was ready to buy Opel if GM's alliance with Peugeot dissolves.
"Opel is not for sale. GM fully stands behind Opel," GM Vice Chairman Stephen Girsky said in a statement sent by email.
"Opel is a fully integrated part of GM's global footprint and vital for GM's future success in Europe. The GM-PSA alliance is fully on track," Girsky said in the statement.
Fiat had expressed interest in acquiring Opel -- known as Vauxhall in the UK -- in 2009, only to see a consortium around Canada's Magna be awarded exclusivity in negotiations with GM that later collapsed.
Separately, Opel's interim chief executive told a German newspaper that it would be a "strategic mistake to leave Europe to the competition" were GM to sell the brand.
Thomas Sedran told the Tagesspiegel newspaper in comments published on Friday he saw significant potential to lower manufacturing costs by sourcing some parts together with a French carmaker rather than with parent GM.
"GM has global requirements for parts and components that are unusual in the industry. A starter is tested at 40 degrees below zero, just as would be needed in Alaska, otherwise it fails the test," he said.
"The supplier can only meet these if he uses expensive materials."
Instead, Sedran and GM executives are in talks to hammer out a deal that would foresee procuring car parts together with Peugeot, which do not need to meet these more demanding specifications.
"As part of the GM group, Opel is oriented much too often on far too stringent standards required under U.S. legislation. Figuratively speaking you need a belt in addition to suspenders -- in Europe one is sufficient," he said.
(Reporting By Christiaan Hetzner. Editing by Jane Merriman)
Keywords: OPEL GM/