UK considering Vauxhall support

Lord Mandelson says the UK government has not ruled out support

The UK government has "not ruled out making a financial contribution" to help secure the future of carmaker Vauxhall, Lord Mandelson has said.

The comments of the UK Business Secretary came as Beijing Automotive Industry Corporation (BAIC) joined the race to buy Opel and Vauxhall.

BAIC becomes the fourth bidder, joining Fiat, Canada's Magna and Belgium's RHJ.

While owner General Motors will have the final say, the choice of the German government is also crucial.

This is because Opel has its headquarters in Germany, and 25,000 of the firm's 50,000 workers are employed in the country.

As a result, the German government is offering the most financial support for the winning bidder.

The late bid by China's BAIC was confirmed by the German Economy Ministry.

The two UK Vauxhall plants at Ellesmere Port and Luton employ 5,000 between them.

German talks

German Chancellor Angela Merkel met Fiat boss Sergio Marchionne on Tuesday to discuss his firm's bid to buy Opel and its Vauxhall brand from GM.

Opel's possible buyers

Her government is now expected to hold a meeting on Wednesday evening, after which it will announce its preferred bidder.

A Fiat spokesman said that Mr Marchionne and Ms Merkel had discussed the bid for an hour.

Following the meeting, Mr Marchionne said Fiat was reducing the amount of state guarantees it wanted from European governments should it buy Opel from 7bn euros ($9.8bn; £6.1bn) to 6bn euros.

While Fiat was talking to the German government, the RHJ and Magna consortia met employee representatives from Opel to explain their plans.

As it is a German election year, the German government is likely to favour offers that limit the number of job cuts.

GM debt talks

The sale of GM's European units is part of the reorganisation of the US carmaker, which is battling to avoid bankruptcy.

The government's biggest concern is the future of GM's Vauxhall's plants in the UK Martin Shankleman Vauxhall's uncertain future

GM faces a 1 June deadline to either restructure its debt or file for bankruptcy, and some newspapers are reporting that it will take the same option as its rival Chrysler and file for Chapter 11 bankruptcy protection.

It is reported to want to secure the sale of Opel and Vauxhall before that date.

If GM is to avoid bankruptcy, the carmaker will need to reach agreement with its bondholders.

GM has set a deadline of midnight EDT on Tuesday (0400 GMT on Wednesday) for agreement from the bondholders.

It has proposed giving the bondholders a 10% stake in the company while giving 50% to the US Treasury.

The existing shareholders would end up with an extremely small stake in the company under the plans.