Vauxhall future is headache for Mandelson

September 11, 2009

jb2- John Bowker is Reuters’ UK transport and defence correspondent. The opinions expressed are his own -

Lord Mandelson was in buoyant mood on Thursday night.

The future ownership of British car-maker Vauxhall had finally been decided. U.S. giant General Motors agreed to sell its European unit — which includes Vauxhall — to Canadian car parts maker Magna and its Russian backers. According to Mandelson, this was good news for the Vauxhall’s 5,000 British workers as it removed the uncertainty over their futures. Everyone can get back to work making cars and live happily ever after.

But for Mandelson the game is only just beginning. He is putting on a brave face now but he must know it is not that simple. He says Magna has assured him to his face that the British plants in Luton and Ellesmere Port will remain open. But for how long? He cannot say. And at what cost? Again — the details are yet to be finalised.

The union leader at Ellesmere Port tells me that an earlier draft of Magna’s business plan called for 830 job cuts at the plant, about 40 percent of the work force. This will be tied to lower output and changes to the pension scheme. Meanwhile, both Ellesmere Port and Luton have no entitlement to build the newer ‘green’ cars that have become a staple condition for future state support. Ellesmere Port will build the new Astra from this month, but what about next decade?

It is hard to overstate how much political wrangling has gone into the GM deal. It has involved Washington, Belgium, Spain, Poland — but particularly Germany, where around half of GM Europe’s workers are based. Magna secured Germany’s support by promising not to close any German plants — so who will take up the slack?

Mandelson is obliged to provide state support to Magna in return for keeping Vauxhall afloat. But there is no way the deal will go through without at least some job losses – possibly many hundreds. That means the Business Secretary will be putting up millions of pounds of taxpayers money to support a company intent on cutting British jobs. Where’s the fairness in that?

The auto industry world has changed forever. We simply do not need as many cars as in the past, and the end of recession will not return demand to previous levels. This means Mandelson and Vauxhall workers must accept some scaling back. But how much do you accept? What good will it do? And how much will we have to pay for it?

These are not questions you envy Mandelson for having to answer. But that’s what we pay him for.

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