General Motors' executives fly in to settle Vauxhall’s way forward

July 27, 2015

Author: De Tai

Senior executives from General Motors will come to London this week to present their detailed business plan for the future of Vauxhall.The American delegation will meet ministers from the Department for Business, Enterprise and Regulatory Reform face-to-face for the first time since the company decided not to sell GM Europe, its European division, which includes Vauxhall.Fritz Henderson, the GM chief executive, and Nick Reilly, the head of international operations and a former head of Vauxhall, will fly to Germany today for meetings with the German Government and unions before coming to London. The meetings in Britain are due to be concluded on Wednesday.The executives will be pressed on whether they will commit to another vehicle being manufactured at Vauxhall’s plant in Luton after the contract to build the Vivaro small commercial van there expires in 2013.In return for details and commitments about the future of Vauxhall’s 4,500 workers in the UK, both in Luton and at the group’s car factory in Ellesmere Port, Cheshire, Lord Mandelson, the Business Secretary, has agreed, in principle, to offer loan guarantees of several million pounds to the Americans as they seek to re-establish their business on a more stable footing only months after emerging from bankruptcy protection.Unions believe that General Motors is not intending to force through any compulsory redundancies at Vauxhall and will largely revert to its original blueprint — known as VP2 — for its European business, which was drawn up before it was forced to ask the US Government for emergency rescue funds.Under those plans, GM was determined to make deep cost-savings at Opel, the carmaker’s other European business.Lord Mandelson and Unite, Britain’s biggest union, will also want explicit assurances that there will be no compulsory redundancies and for the Americans to re-iterate that the new Vauxhall Astra will be made at Ellesmere Port.Under the VP2 plan, production at Ellesmere Port would have been increased to 180,000 cars a year, providing sufficient work for three shifts at the plant. At present Ellesmere Port is producing about 125,000 cars. Unions had only just secured a deal for production to rise to 147,000 cars, in the event that the European business was sold.Last week, the divided board of GM overturned a decision to sell a 55 per cent stake in its European business to Magna International, a Canadian car parts supplier and Sberbank, its Russian financing partner.Executives from the GM board argued publicly that they had changed their mind because market conditions had improved — boosted by taxpayer-funded scrappage schemes in Britain and Germany. However, it is believed that, privately, several board members who had been executives well before the company effectively went bust balked at suggestions from their newer colleagues that they should sell a business that would eventually compete against its former parent.The Magna offer provided the most security for workers in Germany and had been actively encouraged by Angela Merkel, the German Chancellor, with a €1.5 billion (?1.34 billion) bridging loan and the promise of another €4 billion of financial assistance. When the board declared that it would scrap the sale of GM Europe to Magna, the German Government was furious.Mr Henderson is due to travel to Opel’s headquarters in Rüsselsheim and is expected to discuss the decision with local management today.Yesterday, Klaus Franz, the German union leader heading the talks on behalf of Opel, said that he was willing to talk to the American parent over a restructuring of the European carmaker, so long as it gained greater independence. Mr Franz said: "GM does not enjoy any credibility or faith in the eyes of the public or the [German] Government."