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
Lou Reed distorted the truth about his upbringing, and since his death in 2013, biographers and memoirists have added to the myths
musicThe truth about Lou Reed's upbringing beyond the biographers' and memoirists' myths
News
people
News
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the Apple Watch for you? Well, it depends if you want it for the fitness tech, or for the style
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own