Vauxhall's future hangs in the balance

GM board meets to choose buyer, but decision still needs sign-off from Opel Trust

Vauxhall's future was hanging in the balance yesterday as the board of its embattled US parent company, GM, met to choose between the two competing buyers for its European operations.

The choice – between Magna International, the Canadian car parts manufacturer, and RHJ International, a holding company of the US private equity group Ripplewood – has attracted growing controversy as Britain and Germany fight to save jobs at their countries' respective Vauxhall and Opel marques.

A decision from the GM board still has to be signed off by the Opel Trust – the five-strong group to whose ownership GM Europe (GME) was transferred when GM went into Chapter 11 bankruptcy protection at the beginning of June. Sources at GM yesterday said a formal announcement will be made next week at the earliest.

The sale has major political implications. Both the UK and German governments will be providing slugs of money to lubricate the deal, and job cuts are a certainty as the new owner scales back the group's excess capacity.

In the latest scuffle, Lord Mandelson, the Business Secretary, accused the German Chancellor, Angela Merkel, of trying to distort the outcome for political reasons. Berlin is an outspoken supporter of the Magna bid, thanks to guarantees from the Canadian company that it will not shut down any of Opel's German plants, which employ 25,000 people. Although GM originally favoured Magna, it cooled on the deal, spooked by the links with Russia's state-owned Sberbank and van maker Gaz. The US group is concerned about intellectual property issues and competition with its own Chevrolet marque in the growing Russian market.

The British also err towards RHJ. The private equity group has promised to save Vauxhall's two UK factories, in Luton and Ellesmere Port, which employ around 5,000 people. But the strongest statement from Magna has been that "no immediate plant closures are contemplated".

But the Germans are piling on the pressure. The Berlin government this week pledged €4.5bn (£3.9bn) to GME if the parent company selects Magna, prompting outrage from Lord Mandelson. "This decision, above all, needs to secure the long-term viability of both Opel and Vauxhall in the UK and should not be distorted by political considerations in any one country," he said.

Berlin is so keen it has said it will put up the money before other governments fix their stakes. And there have also been hints that the same money will not be available to RHJ.

Magna has rejigged its plans to accommodate GM's concerns. Under the original scheme, Magna was to hold 20 per cent of GME, Sberbank 35 per cent, GM 35 per cent and Opel staff 10 per cent. But the revised version splits the Magna/Sberbank holding, leaving each with 27.5 per cent. The competing deal sees RHJ take 50.1 per cent of GME, while the rest remains with GM.