Whitehall worried about Deripaska link to Magna

Mark Leftly
Sunday 31 May 2009 00:00 BST

Concerns are growing in Whitehall over links between Oleg Deripaska, the billionaire Russian oligarch, and the consortium set to rescue Opel and Vauxhall, the European arms of General Motors (GM).

GAZ, Mr Deripaska's automotive group, owned the Birmingham van maker LDV when it nearly collapsed earlier this year, before selling it to the Malaysian vehicle importer Weststar. Mr Deripaska's businesses have been badly hit by the credit crunch, and he was one of the first Russian entrepreneurs bailed out by the Kremlin.

Despite these difficulties, GAZ has teamed up with the Canadian car parts firm Magna and Russian bank Sberbank in their proposed takeover of Opel and Vauxhall. GAZ would make Opel vehicles in Russia, while Magna has vowed to invest up to €700m (£610m) in Opel.

On Friday, the consortium reached a tentative agreement with GM, which is likely to file for Chapter 11 bankruptcy in the US tomorrow. The British government was desperate for a deal to save 5,500 jobs at plants in Luton and Ellesmere Port.

A Whitehall source said that advisers expressed their concern to the Department for Business, headed by Lord Mandelson, over Mr Deripaska's involvement. The source said: "At least one has raised this issue with the Government. How can we deal with a man who has just gone and dumped LDV? He's had financial problems, so where has the money come from?"

Richard Howitt, the east of England MEP who represents Luton, said: "We have to be sure that any deal has full transparency so that the bidder is not given carte blanche to asset strip. We must get guarantees on both production and jobs."

In the US, President Barack Obama will promise tomorrow that he has no intention of taking over responsibility for the day-to-day running of the US car industry. The government will emerge with more than 70 per cent of the shares in GM following Chapter 11.

With the delicate negotiations over GM's future continuing into the weekend, the White House is concerned about how best to present the most significant interventions in industry by the federal government in more than a generation. Fritz Henderson, who was promoted to chief executive when GM's previous boss, Rick Wagoner, was sacked by Mr Obama in March, is hosting a press conference tomorrow in New York. In Detroit on Friday, leaders of the United Auto Workers union announced their members' vote to accept significant cuts to healthcare and retirement benefits.

White House officials have been insisting that day-to-day control of the company will rest with executives. "There obviously is a balancing act," White House spokesman Robert Gibbs said on Friday. "While not running an auto company on a day-to-day basis, obviously there will be concern about investments by the taxpayer as there should be and those are issues that as part of this restructuring will be worked on."

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