Germany says no to GM

New doubt last night surrounded the future of GM Europe, the European arm of the US car manufacturer, after the German government turned down its appeal for more than €1bn of state aid. Angela Merkel, the German Chancellor, bowed to pressure from the Free Democrats, her coalition partners, who have argued that the business should be expected to stand on its own two feet, particularly now that its US parent company has emerged from bankruptcy and repaid some $8bn in loans received from the American and Canadian governments.

The German decision will cause concern to thousands of GM Europe workers, including staff at its Vauxhall subsidiary in the UK. The business, which has already announced a major restructuring, including the loss of 8,000 of its 48,000 European jobs, had been seeking state aid worth a total of €1.8bn, including €1.1bn from the German government.

In theory, the loss of Germany's support might force the company to make even deeper job cuts than originally envisaged. It is possible, though, that four German states, which have already pledged €500m of support, might be persuaded to increase that figure, or that a different branch of the national German government might consider GM's demands anew.

A terse statement from GM last night pointedly thanked other European governments whose offers of aid remain in place, so far at least. "We appreciate the support of the governments in the UK, Spain, Poland and, of course, the Opel/Vauxhall workforce," it said.

GM's British workforce is in a relatively strong position, with the new Government expected to honour previous pledges of support, and Vauxhall's Ellesmere Port plant widely admired as one of the company's best European facilities.