Luton van workers call on Mandelson to fight for them

Business Secretary visits Vauxhall van plant tomorrow
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Workers at Vauxhall's Luton van plant are tomorrow trying to persuade the Business Secretary, Lord Mandelson, to fight for the factory's future in his negotiations with potential buyers of its parent company.

GM Europe (GME), which includes Vauxhall in the UK and Opel in Germany, was spun out of the failing US giant days before it collapsed into bankruptcy. The division is currently surviving on a €1.5bn (£1.3bn) bridging loan from the German government and is in the process of being sold.

Whichever bidder wins, GME faces major cuts to bring capacity into line with recession-hit demand. The question is which factories will go and, with national governments playing a key role in sweetening the deal, there is major political pressure to barter to secure domestic jobs.

Lord Mandelson was invited to visit the Vauxhall plant in Luton today by local trade unions keen to save members' jobs. "We want to talk to Lord Mandelson about the options and about ensuring support for UK manufacturing in general, and Vauxhall in particular," Dave Osborne, a national officer at Unite, said. "Hopefully we can convince him there is a strong case for the continuation of van production at Luton."

The Canadian car parts manufacturer Magna International, backed by Russia's state-owned Sberbank, was selected as the preferred bidder for GME last month. But hints from the negotiations recently suggest the talks are running into difficulties and that other companies that had shown an interest in GME could be back in the race. RHJ International is reported to have upped its bid, and China's Beijing Automotive Industry Corporation (BAIC) is also putting together more detailed proposals. BAIC representatives are expected to meet with Lord Mandelson for the first time in the coming weeks, ahead of GME's 15 July deadline for renewed proposals.

Vauxhall's car plant at Ellesmere Port is thought to be relatively safe, at least in the short term. It is more efficient than the majority of GM's European factories and it is already geared up to produce the new Astra this autumn.

But industry experts agree that the Luton plant is more vulnerable. Commercial vehicles sales are down by more than a third this year and its contract to build the Vivaro van ends in 2012. Magna has refused to confirm the future of Luton, although an RHJ sale could be an even worse outcome if rumours that its new bid outlines fewer job cuts in Germany prove correct.

"In the context of a company in severe difficulties it would be unrealistic if people were not concerned about their jobs," Mr Osborne said. "At the moment their future is not secure, and it won't be so until we've negotiated with whoever is the successful bidder for GME and convinced them that the UK is a good place to do business."

US car industry: GM and Chrysler sales stall but Ford motors on

The latest sales figures from General Motors and Chrysler, two historic automakers being propped up by the US government, suggest that their bankruptcies have made consumers wary of buying their cars.

In June, one of the most tumultuous months ever for the industry, Chrysler posted a 44 per cent collapse in US sales, compared with the same month a year ago. General Motors, whose brands include GMC, Chevrolet and Cadillac, posted a 34 per cent decline. Both were weaker than expected.

GM had been running a sheepish ad campaign throughout the month drawing attention to its bankruptcy, under the slogan "reinvention is the only way we can fix this".

Rival Ford, which mortgaged most of its assets to raise cash in 2006, before the credit crisis made access to cheap debt much harder, has not needed to take money from the government and has averted bankruptcy – something that has helped it build market share this year. New products, such as the mid-size Ford Fusion and the company's hybrids, helped limit the year-on-year decline in sales to 11 per cent, a better figure than expected.

Analysts had been struggling to predict GM and Chrysler sales for June. Both companies are culling dealerships across the US, while GM is axing less successful brands entirely.

Sergio Marchionne, the Fiat boss installed last month as Chrysler chief executive after a government-sponsored alliance between the two car makers, said the drastic moves are starting to reduce the rate at which Chrysler is burning through cash.

GM's own restructuring plan is being examined by a bankruptcy court in New York this week. The government has stepped up its pressure for a quick approval of the plan, which involves selling the company's best assets to a "new GM" that will be majority-owned by the US taxpayer. Some of GM's bondholders, who will receive less than 10 per cent of the new company in return for giving up their cash claims, are opposing the sale.

A senior Obama administration official, Harry Wilson from the US Treasury's auto task force, told the court yesterday that the government has "no intention to further fund this company if the sale order is not entered by 10 July".

Stephen Foley