After a day of talks with trade unions, who were concerned about the serious threat to the plant, Vauxhall announced it would maintain all its UK operations well into the next millennium, provided they achieved world class productivity standards.
This means that the Luton plant will build the successor model to the Vectra, subject to agreement on a cost and productivity deal with the unions. GM has been contemplating building the car only at two plants on the Continent.
The climbdown follows intense pressure on General Motors from Tony Blair and Margaret Beckett, the President of the Board of Trade, to persuade the US car maker to honour its commitment to "build where it sells".
The Prime Minister is understood to have met management at Luton during a recent tour to promote the New Deal for the unemployed. Mrs Beckett had also been in contact with the company, even though the Government's room for manoeuvre was limited because the Luton plant, which employs 4,500 workers, is not in an area eligible for regional aid.
At a press conference yesterday morning to confirm that the Government will invest pounds 25m in a new pounds 160m van plant in Birmingham being built by LDV and Daewoo of Korea, Mrs Beckett went out of her way to urge a rethink by GM. "Our message to them today is clear. Everyone else is expressing their interest in Britain as an automotive workshop. Everyone else is saying this is a good base to do business and expand so obviously we hope GM will take these things into account in whatever decision they make."
Following yesterday's meeting with the unions, Nick Reilly, chairman of Vauxhall, said: "Today's meeting was the first step on the road to what I believe will be a strong and realistic agreement for both sides. This will allow us to maintain all of Vauxhall's operations at world class standards of cost and productivity levels well into the next millennium."
The unions will meet Vauxhall management again in a week. They concede that it is now 30 per cent more expensive to build the Vectra at Luton than at other GM plants and the situation has been made worse by the strength of sterling. The new Vectra, codenamed the Epsilon, will cost up to pounds 1bn to develop and is due to appear on the roads in about four years. GM has already given a guarantee that one of the two plants chosen to build the car will be at Eisenach in eastern Germany. The selection of the other will be made in the next three months.
Before the meeting, Tony Woodley, chief union negotiator at the company, contended there could even be a question mark over the company's plant at Ellesmere Port on Merseyside which makes the Astra.
Mr Woodley, a national official at the Transport and General Workers' Union, said the more immediate threat overshadowed the Luton plant. He accused General Motors of engaging in "dirty deeds" in secret to ensure the future of the group's plants in Germany after unions agreed to job losses and wage cuts.
Britain is the only country in the European Union with a General Motors presence, which imports more of the company's cars than it exports. It was "completely unacceptable" that the present "trade deficit" of pounds 1.5bn would be increased to pounds 1.8bn if Luton were closed.
Mr Woodley said that British unions might be prepared to negotiate new productivity deals with the company, but management had not held out any prospect that the Luton plant might manufacture a replacement to the Vectra.
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