Berlin calls for higher bids for GM Europe

Both suitors in the running for GM Europe will have to up their bids to win the support of the German government, economy minister Karl-Theodor zu Guttenberg said yesterday.

A GM board meeting in the US this week is a key step in the battle for the group’s European arm, which includes Opel in Germany and Vauxhall in the UK. The parent company is understood to prefer the offer from RHJ International, a private equity group, to that from preferred bidder, Canadian car parts maker Magna, backed by Russia’s state-owned Sberbank. After its initial lead, the Magna deal has struggled because of disagreements over intellectual property issues and plans to seel into the Russian market.

But German states and federal government - which will stump up cash to lubricate the deal and have a strong voice in the talks – lean towards Magna’s plan as less likely to cost local jobs.

Lord Mandelson, the UK business secretary, is negotiating for the UK in the talks. Some British taxpayers’ money will also go into the deal, and the aim is to use the cash to secure Vauxhall’s 5000 jobs. But although both factories, at Luton and Ellesmere Port, could be saved, even Lord Mandelson admits some jobs are likely to be lost.