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The expansion is in response to surging demand from investors, who had put in orders worth of $70 billion for GM's common shares by late on Tuesday, the sources said.

GM's initial public offering, which will reduce the U.S. Treasury to a minority shareholder in the top U.S. automaker, could raise nearly $23 billion if underwriters exercise the full overallotment option. The largest U.S. IPO so far is Visa Inc's (V.N) $19.7 billion stock sale in 2008.

The increased size of the IPO reflects renewed investor confidence in the world's No. 2 automaker less than a year and a half after dwindling cash and falling sales pushed it into a bankruptcy funded by the Obama administration.

GM plans to sell 478 million common shares for $32 to $33 each, raising about $15.5 billion at the mid-point, people familiar with the situation said.

GM earlier on Tuesday increased the size of its preferred stock offering by $1 billion to $4 billion in a move that will strengthen its balance sheet by paying down pension debt -- one of the concerns investors had cited heading into the IPO.

Including an overallotment provision for both common and preferred shares, the GM deal is now set to raise about $22.7 billion if it prices at the high end of the new price range.

The final terms for GM's IPO are expected on Wednesday. The stock is set to begin trading on the New York and Toronto stock exchanges on Thursday.

GM plans to file an amended S-1 document with the U.S. Securities and Exchanges Commission detailing the increased number of shares on offer, the sources said.

Teetering on the brink of failure before the government intervention in 2009, the U.S. auto industry has come through the punishing downturn of the past two years with sharply lower costs and higher profit potential, analysts said.

CASH COW?

"I think part of it may be the market looking at a restructured General Motors and thinking this can be a cash cow again under certain market conditions," said Brad Coulter, a director at Michigan-based advisory firm O'Keefe & Associates.

"If you get back to an even moderate market of 13, 14, 15 million units, I think the market is expecting GM -- and you are seeing it with Ford as well -- to be making a lot of money."

U.S. auto sales are expected to rise to 11.5 million units this year from 10.4 million last year, and are widely seen recovering to the pre-recession level of more than 15 million units in the next few years.

If the GM IPO performs well, it could trigger a shift in public sentiment about the Obama administration's unpopular bailout of the U.S. auto industry in 2009, Coulter said.