Vauxhall expansion brings sigh of relief from motor industry

Vauxhall gave the motor industry a much-needed boost yesterday by unveiling plans to safeguard up to 12,000 jobs at its three British plants through a £189m expansion.

News of the investment came as a delegation of Rover workers met Tony Blair at Downing Street to urge the Prime Minister to back efforts by the Phoenix consortium to keep the Longbridge plant open. Ford is also considering ending car production at its Dagenham plant in Essex.

Ministers and union leaders welcomed the investment by Vauxhall at its Luton and Ellesmere Port factories. The company, part of General Motors, is to build a new Transit-sized van in Luton, creating 500 jobs. It also confirmed the plant would build the Epsilon, the replacement for the Vectra. Vauxhall is investing £32m at Luton in advance of production starting in two years. Another £27m is being spent to move production of the Frontera off-road vehicle from Luton to Ellesmere Port, where it will be built alongside the Astra.

Output of the van, which is being developed with Renault and which is on sale next year, will be 80,000. This will raise Vauxhall's overall UK capacity by 15 per cent to 408,000 vehicles a year. Tony Woodley, chief car industry negotiator for the Transport and General Workers' Union, hailed the announcement as "a hat-trick of good news", adding that it secured up to 12,000 jobs in Luton and Ellesmere Port.

Stephen Byers, Secretary of State for Trade and Industry, said: "This investment is a vote of confidence in UK manufacturing and the workers of Vauxhall and GM."

Nick Reilly, Vauxhall chairman, said General Motors had sanctioned the investment "despite the very high level of the pound, which continues to put a substantial strain on our manufacturing business".

After his meeting with Longbridge shop stewards and their families Mr Blair told the Commons the Government "stands ready to do whatever we can" to help give Rover a viable future. He also repeated that he was "working night and day to bring that solution about".

But there are doubts about whether Phoenix, led by the former Rover chief executive John Towers, will be able to raise the necessary finance to take over Longbridge. BMW, the owners of Rover, have given Mr Towers a week to come up with a deal to save the plant.

Funding of at least £700m is likely to be needed to secure the future of Longbridge. Phoenix is seeking £500m from BMW and £200m from financial institutions.