By Jörn Poltz and Andrea Shalal
MUNICH/BERLIN (Reuters) - German Chancellor Angela Merkel's political standing has suffered in recent months and poor results in two upcoming state elections could lead to "bigger changes", her long-time conservative ally, Wolfgang Schaeuble, said on Friday.
Schaeuble, a powerful former finance minister who now heads the lower house of parliament, told the broadcaster SWR that Merkel was likely be re-elected to lead the Christian Democrats (CDU) at a December party congress if she ran - but did not rule out the possibility that she might not stand.
"She is not as undisputed as she was over the last three legislative periods," Schaeuble said, adding that regional elections in Bavaria and Hesse this month would inevitably affect her "standing".
"We know there are state elections before us. The results are open. They can result in bigger changes," he said.
Merkel, now in her fourth term, has been a popular and formidable leader for 13 years.
But support for her conservative bloc has waned since she decided in 2015 to open the doors to over 1 million migrants, boosting the far-right and forcing her this year to cobble together a frail and loveless national coalition with the Social Democrats.
The decision also fuelled divisions with the CDU's Bavarian sister party, the CSU, which on Sunday faces the prospect of its worst showing in a state election in more than 60 years, suffering, just like the CDU, from the surging anti-immigrant Alternative for Germany (AfD).
Polls suggest the CSU will win at most 35 percent, losing the absolute majority that has allowed it to control Bavaria for most of the post-war period, while the AfD is set to enter the state assembly for the first time with up to 14 percent.
The Munich-based manufacturer MTU Aero Engines issued an unusual pre-election message to employees, urging them to vote "responsibly" and shun populism, similar to local guidance issued by the consulting firm EY.
While stressing that it was not urging support for any one party, MTU told employees in a letter: "Germany, and especially a strategically-orientated industry like ours, relies on stable political conditions."
Reflecting the strains among conservatives, it was Austrian Chancellor Sebastian Kurz who gave the keynote speech at a final CSU rally in Munich on Friday, a spot traditionally reserved for the CDU leader.
Merkel's fourth and probably final government has twice come close to collapsing - over immigration and a scandal over Germany's former domestic spymaster - and now a debate over how to phase out polluting diesel cars threatens to boil over.
Polls also suggest the CDU will suffer heavy losses in the state of Hesse on Oct. 28.
(Writing by Andrea Shalal and Paul Carrel; Editing by Kevin Liffey)