GM 'close' to deal to keep Luton plant open

General Motors is close to reaching a joint-venture agreement that will keep its van plant at Luton open beyond 2013, the company's European boss has revealed.

Luton is operated through a partnership between GM Europe and Renault until 2013, but its future beyond that has looked bleak since GM crashed into Chapter 11 bankruptcy protection in the US last year and began a major restructuring of its European operations.

However, in an interview on Monday, Nick Reilly, chief executive of GM Europe, said he was "pretty near the end" of discussions with Renault about extending their deal.

He added: "We both understand what requirements we have, we think we have got a compromise that both parties can accept and, so I think the time frame for that is within the next month or two at most."
Mr Reilly also disclosed that the UK Government only provided loan guarantees of €300m (£270m) to safeguard the future of GM-owned Vauxhall, which employs 5,000 people in the UK, after asking the American parent company to commit an extra €400m to the business.

GM was initially to seeking to raise €3.3bn from is own funds and European governments to finance the restructuring of GM Europe. However, GM announced earlier this month that it would add €415m to this and treble its own commitment from €600m to €1.9bn.

Mr Reilly has now revealed that this increase was made after specific requests from the UK Government, whose negotiations were led by Lord Mandelson, the Business Secretary. Mr Reilly added: "When they looked at the plan, they said: 'We think this is a good plan and relatively conservative, but if we do have a real double-dip recession and we go back into much weaker economic conditions, then you may need some more money than you are asking for'. And so they asked us for an additional €400m, guaranteed by GM."

The Government also asked for other terms, which Mr Reilly would not disclose, and reassurances about the future of Vauxhall's plants. Ellesmere Port is "an important part of the company going forward" and in line for a third shift, according to Mr Reilly, but Luton, which employs 1,500 staff, has faced serious doubts about its future because sales of vans slumped in the recession and it was not clear whether Renault wanted to extend the venture. More than 350 jobs will go at the plant in GM's European restructuring.

Article from the Telegraph

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