LONDON BRIEFING:THE FINANCIAL headlines have been dominated this week by the collapse into bankruptcy of General Motors, the once proud symbol of America's industrial might. Thousands more jobs will go, and plants shut, as the US automaker slashes its operations in a bid to restore itself to something approaching the financial health required if it is to meet the fast-track deadline of re-emerging within three months.
In Britain, Vauxhall was spared bankruptcy by the 11th-hour takeover of Opel, the company which now comprises General Motor’s European operations, by the Canadian car parts maker Magna. It secured the deal after the abrupt withdrawal of Fiat, which had been the frontrunner.
Any celebrations among Vauxhall’s 5,500-strong workforce at avoiding the same fate as their former parent in the States have proved short-lived. Opel employs more than 50,000 across Europe and it is clear that heavy cuts will have to be made if the business is to survive.
Around half the Opel workforce is located in Germany – hence the pivotal role played by the German government in the takeover talks – and the new owners have already announced plans to cut 2,500 jobs there. They have been coy about where the other cuts will fall, however, indicating that they will wait for the deal to be fully concluded in September before they reveal their plans.
Thus it could be months before the Vauxhall workers, at Luton in the south and Ellesmere Port in the northwest of England, finally learn their fate. Magna has assured business secretary Lord Mandelson that it is committed to maintaining car production in the UK but there are growing fears of heavy job losses here.
The fears centre on the Luton plant, which makes the Vivaro van, a contract which lasts only until 2012. Ellesmere Port, which makes the Astra and employs the bulk of the Vauxhall workforce, is by no means fireproof but is widely regarded as one of General Motors most efficient plants.
Magna has set out its aim to return the former GM Europe business to profitability by 2011 – an ambitious target given the collapse of the global automotive market. The business made losses last year of almost £1 billion (€1.15 billion).
While Vauxhall workers wait to learn their fate, there was unwelcome news yesterday for hundreds of employees of the Birmingham-based van maker LDV, who thought their jobs had been saved.
Just two weeks ago, the Malaysian company Weststar, which distributes LDV vans, rescued the business from the brink of administration. But now its takeover has collapsed, despite a £5 million bridging loan offered by the government, after the Malaysian buyers found themselves unable to raise the finance to fund the takeover.
The GMB union, which saw its workers sent home from the plant yesterday morning, said it was seeking urgent talks with the Malaysians, the UK government and the management of LDV, which is controlled by the Russian oligarch Oleg Deripaska. But, after a fortnight of hope, administration now looks inevitable.
There was some good news for the car industry this week – a return to work for thousands of employees at the Honda plant in Swindon after an enforced four-month layoff. While welcome, the return was hardly a triumph as the plant, which makes Honda Civics, will run at only half capacity for the foreseeable future.
Only 3,400 of the 5,000-strong workforce have returned to their jobs and they have had to agree pay cuts of between 3 and 5 per cent.
As the latest buzzword – “staycation” – heads rapidly towards inclusion in the Oxford English Dictionary, companies that benefit when Brits holiday at home are making the most of it.
BQ-owner Kingfisher caught analysts on the hop yesterday when it revealed profits in its struggling UK business had almost doubled over the first quarter. Sales of barbecues and other garden products soared along with the temperatures, but the group is also benefiting from a renewed passion for gardening, as more and more of us grow our own vegetables in an effort to save money.
DIY is also staging a comeback, as cash-strapped customers shun the professionals and spend their holidays doing up the house. Other companies to benefit from the stay-at-home trend include Halfords, which recently reported soaring sales of roof racks and boxes as families drive to holiday destinations in Britain rather than take the plane to Spain.
Sales of tents are up too, while department store group John Lewis has seen a jump in demand for picnic baskets, barbecues and garden furniture.
Let’s just hope the weather holds out.
Fiona Walsh writes for the Guardian newspaper in London
