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Business News

UK set to agree Vauxhall funding deal

The decision on Government funding to help to rescue Vauxhall could be completed within weeks, according to Lord Mandelson, the Secretary of State for Business.

GM Europe (GME) – which owns Vauxhall in the UK and Opel in Germany – published restructuring plans this week that would cut capacity by 20 per cent and, it forecasts, haul the group back to profitability by 2012. Some 8,300 jobs will be lost, with 500 of them in the UK.

The British Government has repeatedly said it is willing to contribute to the saving of Vauxhall, with a figure of £400m touted during last year's abandoned sale talks with Magna. The question of funding is now back on the table, said Lord Mandelson, pictured.

"We are prepared to play a part in the financial underpinning of GME going forward," he confirmed. "From a UK point of view, the restructuring plan is encouraging."

GME's plan includes €11bn (£9.6bn) of investment during the next five years, and the launch of eight new models this year and four in 2011.

But the company is looking for €3.3bn (£2.9bn) from European governments to help it return to growth. The details of the strategy are now being pored over by officials, and negotations have started over what conditions could be imposed in return for Government support.

"When you hand over large sums of money, or loan guarantees, you have to have conditions," Lord Mandelson said. "The taxpayer's interest has to be protected, and we have to have security for what we are putting in. We've started those discussions and could complete them within the next month."

GME was almost sold to Canadian parts maker Magna, backed by Russia's Sberbank last year. But the sale fell through in November when the parent group, which was resurrected from the ashes of the biggest industrial failure in US corporate history, decided it could, after all, afford to turn around its loss-making European operations.