Vauxhall buyout will get the government support

Britain's car manufacturers and its unions are no longer the problem, but the solution, business secretary Lord Mandelson said today.

His comments came as he pledged the Government's support in underwriting a deal to buy out struggling car company Vauxhall.

Lord Mandelson toured Vauxhall's Luton plant, meeting union officials and company managers as negotiations continued with potential buyers of its parent company.

He said the Government would underwrite a deal for the sale of GM Europe, which includes Vauxhall in the UK and Opel in Germany, but refused to be drawn on what figures a deal would involve.

He said: "I have seen the performance record, I have seen the productivity, I have seen the safety and the lack of absenteeism.

"Unlike in the past when we saw Britain's carmakers and their unions frankly being part of the problem, it's very different now.

"Definitely here in Vauxhall they are part of the solution."

Canadian car parks manufacturer Magna, backed by Russia's state owned Sberbank, was selected last month as the preferred bidder for GM Europe, but other companies have shown an interest, Lord Mandelson confirmed today.

He said they were not ruling out any options for a buyer but said at the moment Magna was the most likely buyer.

He said: "I can't give guarantees, I am hopeful, I have had some reassurance given to me by the prospective owners but there's still work to be done.

"I believe that Luton should be and will be part of Magna's long-term plans but it's not a done deal.

"We have to make sure that what we are investing in is not just commercially viable but is long term.

"We view Magna International as the prospective preferred owners of GM Europe but I am not excluding others."

The minister said the Government was doing everything possible to save productivity across the car industry especially in Luton and Ellesmere Port, adding: "I have been able to ensure the workforce and the unions know we are doing everything we possibly can to safeguard production here in Luton and Ellesmere Port.

"There's a lot of people's jobs and businesses counting on continued production.

"I am talking to all the right people and I'm going to all the right meetings but what we have to do as a Government, because we are looking after taxpayers' money, is to ensure any solution is commercially viable and long-term."

Lord Mandelson said the Government's pledge to underwrite any deal could take the form of loans or loan guarantees, but refused to be drawn on any details, including the amount to which the support would stretch.

He said nationalising the company was not an option.

Vauxhall's car plant at Ellesmere Port is geared up to produce the new Astra this autumn, but there is less certainty over the future of Luton.

Commercial vehicle sales are down by more than a third this year and the Luton plant contract to build the Vivaro van ends in 2012.

The Luton plant employs about 1,500 workers, provides work for a further 500 in-house contractors and supports about another 4,000 jobs across the component and supply chain.

Yesterday Lord Mandelson commented on the Government's decision to take control of the loss-making East Coast Main Line rail service, saying it could not allow itself to act as "one big ATM" for failing businesses.

But today he said its support of Vauxhall was not the same situation. He added: "It's a difference between what has had a great past and may not have a great future and what we are investing in that will have a great market, will have a quality product and will remain viable for years to come."

Len McCluskey, Unite's assistant general secretary, said: "For the workers at Luton and Ellesmere Port, Lord Mandelson's pledge today of Government support in securing a deal for the plants will be very welcome.