UK jobs in balance as Deripaska group buys GM Europe

Government seeks assurance on UK plants, and concerns grow over involvement of Russian oligarch

The future of General Motors' European arm in the wake of its projected sale was muddied yesterday by concerns over both the safeguarding of British jobs and the involvement in the deal of the billionaire Russian oligarch Oleg Deripaska.

GAZ, Mr Deripaska's automotive group, owned the Birmingham van-maker LDV when it nearly collapsed earlier this year, before it was sold to the Malaysian vehicle importer Weststar. Mr Deripaska's businesses have been badly hit by the credit crunch, and he was one of the first Russian entrepreneurs bailed out by the Kremlin. Despite these difficulties, GAZ has teamed up with the Canadian car-parts firm Magna and the Russian bank Sberbank for a takeover of Opel and Vauxhall. GAZ would make Opel vehicles in Russia, while Magna has vowed to invest up to€€700m (£610m) in Opel.

The consortium yesterday finalised an agreement with GM, which is likely to file for Chapter 11 bankruptcy in the US tomorrow. The British government was desperate for a deal to save 5,500 jobs at plants in Luton and Ellesmere Port. A Whitehall source said advisers expressed their concern to the Department for Business, headed by Lord Mandelson, over Mr Deripaska's involvement. The source said: "At least one has raised this issue with the Government. How can we deal with a man who has just gone and dumped LDV? He's had financial problems, so where has the money come from?"

Richard Howitt, the East of England MEP who represents Luton, said: "We have to be sure that any deal has full transparency so that the bidder is not given carte blanche to asset-strip. We must get guarantees on both production and jobs."

The Government was last night seeking confirmation that Vauxhall's plants at Ellesmere Port and Luton would be kept going by the new owners. Lord Mandelson said he would seek swift confirmation from the firm that none of the Vauxhall jobs in the UK would be lost. The Ellesmere Port MP, Andrew Miller, said yesterday it would be "unwise" of Vauxhall's new owners to consider cutting production in the UK, which represents about a fifth of the company's sales. But he urged all sides to work in partnership to secure the Cheshire site's future and protect the 2,200 plant jobs and the 15,000 supply chain jobs linked to Ellesmere Port.

Unite's convenor at Vauxhall, John Featherstone, said staff had already done all they could to reduce costs and boost production during the bidding process for the new Astra, which begins production in October. He said: "Staff at Ellesmere Port have done really well in making cost savings, raising production and improving quality. But Magna will come in and they will want to drive costs down even further. I don't know what Peter Mandelson considers to be a commitment. There is certainly nothing on paper that we know of and, as the UK government was not at the negotiating table, I wonder how he can make such demands."

President Barack Obama will promise tomorrow that he has no intention of taking over responsibility for the day-to-day running of the US car industry. The government will emerge with more than 70 per cent of the shares in GM following Chapter 11.

With the delicate negotiations over GM's future continuing into the weekend, the White House is concerned about how best to present the most significant interventions in industry by the federal government in more than a generation. Fritz Henderson, who was promoted to chief executive when GM's previous boss, Rick Wagoner, was sacked by Mr Obama in March, is giving a press conference tomorrow in New York. In Detroit on Friday, leaders of the United Auto Workers union announced their members' vote to accept significant cuts to healthcare and retirement benefits.

In the driving seat: Canadian immigrant who built an empire

Magna International chairman Frank Stronach left Austria for Canada at the age of 21 with $200 and a suitcase. His first job was peeling potatoes and washing dishes in a hospital kitchen. The 76-year-old started his firm in a garage more than 50 years ago, and it is now the world's third-largest car parts supplier, with headquarters a half-hour's drive north of Toronto. Staff receive a share in profits, and plants are run as independent entities. Mr Stronach has a personal fortune in excess of $1bn. He is married with two children, a daughter who is former MP and a son involved in breeding racehorses.