Vauxhall rescue package 'not ruled out'

The Business Secretary Lord Mandelson said the Government had "not ruled out" a financial contribution to help secure the future of car maker Vauxhall, a report said today.

According to the Financial Times, the Cabinet member held "substantial telephone conversations" yesterday with the bosses of Vauxhall's parent companies.

He spoke to Fritz Henderson, GM's chief executive, and Carl Peter Forster, chief executive of GM Europe, to make clear the "UK's commitment to all of Vauxhall's plants", the paper said.

His reported intervention comes ahead of an imminent decision by the German government to name a preferred bidder for GM's European arm Opel and Vauxhall.

The move will impact staff at Vauxhall's UK factories in Luton, Bedfordshire, and Ellesmere Port, Cheshire, which employ a combined total of around 5,000 people.

There are fears the German government could give in to election-year pressure with a pledge to protect domestic jobs at the expense of those in the UK.

Berlin's opinion - which could come today - is important as it is being asked to make billions of euros worth of loan guarantees as part of any deal. Opel also has its headquarters in Germany, where half of the firm's 25,000 workers are based.

Four entities are bidding to buy Opel and Vauxhall - Beijing Automotive Industry Corporation (BAIC), Italian car maker Fiat, Canadian car parts maker Magna and Brussels-based investor RHJ.

Fiat wants to create one of the world's biggest motor manufacturers by combining its operation with Chrysler in the United States and General Motors' European offshoot.

The sale of GM's European arm is part of the reorganisation of the US carmaker, which is battling to avoid bankruptcy.

Pressure to agree on a partner is building ahead of a June 1 restructuring deadline for GM set by the US Government, which could lead to a Chapter 11 bankruptcy filing by the Detroit-based car maker.

Earlier this month Lord Mandelson spoke to Germany's economics minister Karl-Theodor zu Guttenberg about potential implications for UK workers.

Lord Mandelson said after the discussion: "We agreed that GM Europe's future had to embrace all the existing GM Europe operations including Opel in Germany and Vauxhall in Britain.

"Laying down exclusively German conditions for the company's future is no more acceptable than saying exclusively British interests have to predominate."

The UK is GM Europe's largest European market - comprising almost 30 per cent of total sales revenue.