Page last updated at 15:37 GMT, Thursday, 28 May 2009 16:37 UK

Concerns grow over Vauxhall jobs

Lord Mandelson said both bidders for GM Europe had committed to UK production

Concerns about the future of Vauxhall's two UK plants are growing after talks broke down in Germany over which firm will buy its parent company, GM Europe.

Two of the bidders have said they will cut thousands of jobs in Europe.

With the German government a key player in negotiations, there are fears that Vauxhall jobs could be hit hardest.

But UK Business Secretary Lord Mandelson said he had received "categorical assurances" about continued Vauxhall production.

Vauxhall employs 5,500 UK workers and has plants in Luton and Ellesmere Port.

Job losses

"Vauxhall's production in the UK is a main revenue and profit stream for GM. There is no question of [GM] wanting to dispense with it," Lord Mandelson said.

"We are making sure the future of Vauxhall is secured."

But he did admit that the there would be "reorganisation and restructuring."

"There will be some job losses here, as elsewhere [in Europe]," he said.

Vauxhall dealer: 'Confidence is a big thing in car purchases'

He also reiterated the UK government's willingness to provide funding to the new management, depending on its plans for Vauxhall.

Lord Mandelson was responding to criticism that the UK government should be doing more to safeguard UK jobs.

Professor David Bailey, a car industry expert at Coventry University Business School, told the BBC that, taking into account suppliers as well as Vauxhall itself, the total number of UK jobs that could be affected by the takeover is between 15,000 and 20,000.

In his view, Vauxhall workers "are very exposed".

And continuing uncertainty could only make matters worse, said Nigel Grey, the boss of Vauxhall's main dealership in Luton, as demand for cars could be affected, exacerbating the slump in sales the company is already experiencing during the recession.

"Confidence is a big thing in any purchasing decision. People are worried about buying a product when they feel there may be no service in the future - I'm sure that won't happen, but it is a confidence issue," he said.

'Too slow'

Tony Woodley, joint general secretary of the Unite union, said that the UK government needed to be "batting for Britain".

The UK government has been far too slow and far too reactive
Professor David Bailey, Coventry University Business School

"Whoever takes over, there will be plant closures, but [the UK government] is not putting money in and is not at the negotiating table," he said.

"If we are not, common sense tells you the axe will fall outside Germany, outside Spain and outside Belgium. The government has got to do more."

Professor Bailey added to the criticism by saying that the UK government was being "extremely vague" and had been "caught on the hop".

It had, he said, been "far too slow and far too reactive".

Deadlock

Earlier on Thursday, talks in Germany about who should buy GM's European unit - which contains Opel and Vauxhall - ended without reaching a decision.

GM EUROPE BIDDERS' PLANS

Fiat: Italian carmaker; plans 10,000 job cuts in Europe; could close one of four Opel factories in Germany

Magna: Canadian-Austrian car parts group; Plans 2,500 job cuts in Germany; pledges to inject between 500m and 700m euros into Opel; 10% of the new company would be owned by Opel employees; GM would keep a 35% stake in the company; bid in connection with Russia's state-run Sberbank and Oleg Deripaska's truck firm Gaz

But German ministers and Lord Mandelson said that the four potential bidders had been whittled down to two, leaving Italian carmaker Fiat and Canadian-Austrian car parts firm Magna as the two remaining suitors.

Fiat has said that it will cut 10,000 jobs across Europe if it is successful.

The German government has pledged billions of euros in loan guarantees to the company that takes over GM Europe, which means it has an important say in the bidding process.

Opel employs 25,000 people in Germany.

The talks between the German government and GM will reconvene on Friday.

All parties have been working towards a deadline of 1 June, the date by which the US government has insisted that General Motors restructure its debt or file for bankruptcy.

But the UK could still play an important role in the future of GM Europe, some analysts argue.

European ministers have called for a meeting on Friday, when they will discuss a short-term bridging loan that could secure the short-term future of Opel and Vauxhall, said Simon Dorris at Lansdowne Consulting.

HAVE YOUR SAY
Sadly this and the previous government have destroyed manufacturing in this country
Paul, Haynes

But he said there was little precedent for any such EU-wide coordination.

"The Belgians and the Spanish are unlikely to make a major contribution, so a lot will depend on Lord Mandelson to provide short-term financing," he argued.

Opel has factories in both Belgium and Spain.

If a short-term bridging loan cannot be agreed, then Opel and Vauxhall will become embroiled in GM's administration process, should the US parent company declare bankruptcy, which could happen before the 1 June US government deadline, he added.

Production lines

The Vauxhall plant at Luton, which employs 1,400 people, produces vans and is operated as a joint venture with Renault, a competitor of Fiat, under a contract which expires in 2012.

Van production at the plant has halved since the onset of the economic downturn.

At the Ellesmere Port plant, which employs 2,200 people, a new version of the Astra car is due to roll off the production lines this autumn, supported by a government grant of £8m for training.



Print Sponsor


RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites

FROM OTHER NEWS SITES
Telegraph GM: Deal is struck to save car maker Opel - 1 hr ago
ITN Vauxhall deal reached - 4 hrs ago
Observer Mandelson seeks job pledge as Magna wins race for Vauxhall - 10 hrs ago
Finance 24 GM suitors vow to keep UK jobs - 14 hrs ago
Channel 4 News for Vauxhall - 18 hrs ago



FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC navigation

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific