The Government is to give Ford a pounds 15m package of regional aid to enable it to build a new people carrier vehicle at its Halewood plant, safeguarding 1,850 jobs.
Meanwhile, unions at Peugeot's Ryton plant in Coventry, which employs 2,500, voted in favour of a two-year pay deal, paving the way for a pounds 100m investment on a replacement for the Peugeot 205.
The government aid for Halewood is much less than Ford had hoped for. The company had been negotiating to receive up to pounds 75m with a warning that if support was not forthcoming it would have to close the plant with up to 2,500 job losses.
A spokesman said: "We are pleased to be in receipt of a government grant. We would have liked more but we are still happy. This keeps the new model on track."
The new model for Halewood will be a "multi-activity vehicle" based on the platform of the next Escort which Ford announced in February would be built in Spain and Germany but not in Britain.
The decision resulted in the loss of 1,000 jobs. But Ford pledged instead to build the new multi-activity vehicle provided government support was forthcoming and Halewood's productivity improved.
The Merseyside plant will continue to build the existing Escort until 2000 and then start production of the new vehicle. Output is planned to reach 140,000-150,000 a year. Halewood will be the sole manufacturer of the vehicle for British and European markets.
A Ford spokesman said that the government aid, in the form of Regional Selective Assistance and training grants provided through the local Merseyside TEC, was "key" to the investment going ahead.
The new pay deal at Peugeot has averted the threat of a strike and paved the way for a pounds 70m investment programme to build a second model at the site.
More than 2,000 shopfloor staff at Ryton near Coventry voted by 73 per cent in favour of the two-year deal, which gives a 5 per cent pay increase this year and 0.5 per cent above inflation next year.
They also accepted Peugeot's flexible working plans, which include the first annualised hours agreement in the British car industry. Employees will move from their existing four-day week to flexible working patterns based on a fixed number of hours each year.
Tony Woodley, the national organiser for the Transport and General Workers Union, said that the agreement heralded an "uneasy peace".
Staff were still bitter and frustrated at Peugeot's changes to working practices, mirroring those in its French factories.
Mr Woodley added: "There are still major deficiencies. I've no doubt that the annualised hours changes will come back to haunt us or create problems elsewhere in the industry."
Peugeot said it was "relieved" at the ballot result, which meant the company would push ahead with plans to build a new small car at the plant late next year. The model is widely expected to replace the long-running 205 hatchback.
Ryton currently assembles the Escort-sized 306 model at the rate of 2,300 a week. It last produced two models at the factory in the early 1990s.
About pounds 30m of a pounds 100m investment programme has already been spent on a revised version of the 306.
The additional pounds 70m will be spent building a new assembly plant at Coventry - the first new building on the site for 40 years. It was once the centre of the Rootes empire, responsible for brands such as Hillman and Sunbeam.
In the early 1970s the Rootes group was bought by Chrysler of the US in an ill-fated European expansion drive which ended with a crisis sale to Peugeot at the end of the decade. Ryton's long-term future within the Peugeot group has been periodically threatened, partly because of its reputation for shopfloor unrest. However, productivity improvements over the past 10 years have steadily made it one of the most efficient assembly operations in the industry.Reuse content