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."

PROMOTED VIDEO
News
video
Life and Style
tech
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
film
Arts and Entertainment
Up my street: The residents of the elegant Moray Place in Edinburgh's Georgian New Town
tvBBC's The Secret History of Our Streets reveals a fascinating window into Britain's past
Extras
indybest
News
Albus Dumbledore, the headmaster of Hogwarts School of Witchcraft and Wizardry has been the teaching profession's favourite teacher
education
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Luis Suarez looks towards the crowd during the 2-1 victory over England
sport
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
News
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sport
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Sport
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Junior Research Analyst - Recruitment Resourcer

£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...

Senior Analyst - Financial Modelling

competitive: Progressive Recruitment: This really is a fantastic chance to joi...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform