Battle for Vauxhall jobs set to go down to the wire

Ministers in last-minute negotiations over business plan for GM Europe
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Lord Mandelson and officials at the Department of Business will spend the weekend in last-ditch talks aimed at protecting British workers as the US car giant General Motors closes in on a deal to sell its European division, including Vauxhall, to a consortium led by the Canadian auto parts maker Magna International.

The Government insisted last night that, despite concerns that Magna's purchase of GM Europe would see a disproportionate number of UK workers lose their jobs compared to their counterparts in the GM's German operation Opel, talks were continuing and it was not too late to secure a deal.

At stake are 6,000 jobs at GM Europe's Vauxhall plants in Ellesmere Port and Luton, with Magna already having warned that staff cutbacks will be inevitable across the operation.

Lord Mandelson and British trade unions remain anxious that the Magna deal, to which GM signed up in principle last month following the recommendation of the German government, will see German workers given priority. The deal depends on European governments providing Magna with loan guarantees worth €4.5bn, but with Germany already having agreed to provide €4bn of the total, there are fears Magna will not want to embarrass ministers in Berlin.

Magna and GM hope to formally sign the deal in the next few days, but the UK Government told the two companies this week it was not prepared to agree to the proposals in their current form. Magna is hoping for €400m in loan guarantees from Britain, but Lord Mandelson has so far refused to sign off on the finance.

The Spanish government is also seeking last-minute changes to the agreement, which has ramifications for GM Europe factories in Spain.

Yesterday, Spanish officials refused to attend meetings in Berlin to discuss the deal, as a protest at their unhappiness with Magna's current business plan. The Spanish will instead appeal directly to Magna at a meeting early next week.

If Lord Mandelson continues to refuse to sign off Britain's loan guarantees, a deal between Magna and GM Europe would still be possible, with the pressure falling on Germany to make good the difference. Howard Wheedon, a motor specialist at BGC Partners, said the Secretary of State was taking a risk because Britain could be left with no place at the bargaining table, but the strategy was the best hope for saving more jobs at Ellesmere Port and Vauxhall. "At long last Lord Mandelson really is now sticking up for British jobs," Mr Wheedon added.

This weekend's negotiations follow talks on Wednesday between Unite, the union representing Vauxhall workers, Magna and Lord Mandelson's deputy Pat McFadden. It is understood that Magna said it was planning as many as 1,200 job cuts in the UK, more than the Government and Unite had been expecting.

British and Spanish workers are also pinning their hopes on a European Union inquiry into Germany's role in the Magna deal with GM. The EU's Competition Commissioner, Neelie Kroes, is investigating whether the German government breached EU law by extracting a more favourable outcome for its workers in return for extending finance to the consortium.

However, Ms Kroes is unlikely to give her verdict before the deal has been signed.

A spokesman for Lord Mandelson said yesterday: "Our attempts to get a better deal are continuing and the Business minister has made it clear that he has concerns."