GM sale U-turn 'pleasant surprise' for Vauxhall

Decision to drop Magna provokes ire in Germany / But Mandelson ready to put money up for viable plan

GM's U-turn over the fate of its European arm had German politicians spitting chips yesterday, but the Business Secretary, Lord Mandelson, called it "a pleasant surprise for workers" at Vauxhall in the UK.

Germany's economics minister Rainer Brüderle called GM's conduct in backing out of the deal with Magna International and Russia's Sberbank as "completely unacceptable" and said GM would be asked to repay May's €1.5bn bridging loan. There were also threats of strikes from German unions.

In the UK, the decision was met with "delight" from the unions and optimism from staff. A source at Vauxhall said: "People trust GM more, we know the way the company works already."

GM's restructuring plan – which is though to have a €3bn (£2.7bn) price tag, some €1.5bn lower than Magna's – will now be discussed with European governments with a view to raising the necessary state aid. Under the Magna plan, Germany pledged €4.5bn of support – of which an unspecified amount thought to be around £400m was expected from the UK Government.

Lord Mandelson had "constructive" discussions with both Mr Brüderle and GM chief executive Fritz Henderson yesterday, and is prepared to offer financial support provided GM's restructuring plan makes sense.

John Smith, a vice-president at GM Group, said GM's plan for GME, which includes Opel and Vauxhall, will be much the same as that proposed by Magna/Sberbank because both are based on the viability plan originally developed by the parent company.

GM's restructuring is likely to include redundancies of a similar order to the 10,000 job cuts proposed by Magna. But Mr Smith would not be drawn on factory closures. "There is very little daylight between what Magna or GM is proposing," Mr Smith said. "The plans are not identical but they are similar. There are not very many plant-by-plant differences."

Sources claim the viability plan moots the closure of Bochum and Eisernach in Germany and Antwerp in Belgium. Mr Smith implied yesterday that GM may have "subsequently found an interesting plan" for Bochum. But GME's 5,500 Vauxhall workers in the UK are optimistic because the plan is thought to include plans for Ellesmere Port to expand from two shifts to three.

Mr Smith said GM's volte-face was "fundamentally a strategy call". "We reached the conclusion that GM has the means and the capability to restructure the company, and that it was in the best interests of Opel and GM."

But there were also significant shortcomings in the Magna deal, including strategic differences between the two companies that raised concerns over the longer-term relationship. Magna's plans for the Russian market were also thought to be insufficiently robust.

Garel Rhys at Cardiff Business School's Centre for Automotive Industry Research says GM's change of heart is a good result for the UK and also for GM. Even the German government has less to cavil about than the political soap-boxing suggests. Given Europe's stringent competition rules, Germany's efforts to secure domestic jobs were never likely to go unchallenged. But the deal lived long enough to win points with German voters in the run-up to last month's election.

"Europe's Competition Commission plays hardball with the motor industry so the end result of GM's decision will not be that different for Germany," Professor Rhys said. "The U-turn may be a minor irritation and produce some short-term embarrassment, but the German government achieved the objective, which was to win an election."

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Life and Style
food + drink
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas