Nowadays Nick Reilly takes time out of an overcharged schedule - chairman of Vauxhall and chairman of the Confederation of British Industry (CBI) economic committee inter alia - to reflect on life, the car industry, politics, interest rates, when he's on a plane or walking in the French Alps.

"I tend to sit back and look at it all from an outsider's point of view. You learn listening to other people or reading things you don't normally read or get a different slant from others' views. I mean, I get the automotive industry views all day but this helps you think more like a customer."

Nearly 25 years ago, when he was 25 and a Manchester-based stockbroker, he went up a north Wales mountain above Llangollen and spent six months alone in a hut, feeding sheep and thinking and writing, about life and his own ambitions. He decided to make things, to join the manufacturing industry and now, as he nears 50, he remains passionately a manufacturing man.

The gingery beard he grew in the Welsh hills has gone and the figure he cuts now is stiffer, tall and just a shade paunchy in his dark blazer and slacks. But he retains a taste for the dramatic gesture - like giving up his £165,000 sterling (€251,065) basic salary a year ago last May to help persuade Vauxhall's employees to accept a tough three-year pay and productivity deal and keep open the Luton car plant.

"As from May of this year I'm back being paid," he says with just the glimpse of a smile. The manner, not just the posture, is stiffer now; he's not a man given to self revelation or even small talk, let alone jokes; reserved, not overtly ambitious - but you don't get to be the first Briton to become a General Motors vice-president without focused ambition - and clearly a workaholic. Only over a pint or two or perhaps at home in Woburn does he unwind.

He may be a manufacturing man through and through but, as chairman of the CBI economic committee, since April, he has to keep competing sectoral views together as regards policy towards the pound, interest rates, the euro, fiscal policy and the whole gamut of macroeconomic policy. But he says: "My choice as chairman is to demonstrate that it's not always someone out of the financial sector and it can be from manufacturing, and the CBI wanted to see a change. It had been someone for the last five years from the financial segment (Andrew Buxton of Barclays)."

He makes plain there will be no dramatic policy shifts under his tenure and his committee will steer a fine, taut course between seeking further stimulus for the economy via rate cuts and opting for the primacy of stability. "The economy is obviously picking up, we seem to have bottomed out and the downturn will be shorter-lived than some had feared and other positive signs exist."

But he immediately adds that manufacturing remains pretty weak and, some think, would benefit from not having a 2.5 per cent penalty compared with the euro zone (where base rates are 2.5 per cent compared to Britain's 5 per cent).

"Can the UK afford to try to assist those parts of the economy that are still struggling from the effects of the high pound and interest rates without risking inflationary pressures?" he sums up the last committee debate. In the end members opted for no change on the grounds that the full impact of successive cuts might not have come through and "it would be better not to go headlong one way only to compensate by doing the same thing the other way".

He adds: "One message we wanted to send is talk of raising rates was and is inappropriate. Some commentators are saying and as the (Bank of England's) monetary policy committee itself points out: it's almost as big a crime to undershoot the inflation target as to overstep it." Last week's MPC minutes reflect uncertainty over the direction of rates policy, with a three-way split, but Mr Reilly clearly backs the doveish group headed by De Anne Julius.

He is distinctly on message as regards the treasury and bank. "I think we are close to the Goldilocks economy . . . [a delicate not-too-hot, not-too-cold balance of growth without inflation] and that's why any policy that creates stability has got to be applauded . . ." Gordon Brown, the chancellor, has, he thinks, been lucky in the legacy he inherited but, equally, acted swiftly enough (with the bank) to offset the impact of last year's global financial crises and restore growth.

He remains devoted to the cause of manufacturing, however, worried that the shift to services has gone too far - especially that a hard core of structurally unemployed people cannot be retrained to work in services and, after being laid off by industry at the age of 45, will never work again.

Any disruption to this "nice, steady world of economic growth" and services are the first to suffer, leaving countries like Britain forced to fall back on agriculture and industry. "If industry has shrunk too small you are likely to get hurt more. I do believe we need a mixed economy both to exploit the skills we have and to have a better hedge against worldwide depression."

Ideally, Mr Reilly would like to see a rebirth of Britain's capital goods sector. But he recognises that the overarching issue for manufacturing is productivity - not external factors like sterling or interest rates. "There are huge opportunities for productivity improvement, certainly getting towards double digits for two or three years running . . . We did that at Vauxhall in the early '90s when we were under threat from overcapacity and could have been the losers but we improved rapidly.

"We are nowhere near finished. We are talking 6 per cent, 7 per cent or even higher. When the (government-sponsored) motor industry forum goes in to help a supplier they are typically getting performance in the double digits and there needs to be a tremendous push on this."

Mr Reilly thinks that a deliberate effort to manage down sterling's exchange rate via lowering the cost of borrowing would have been a mistake and he's got little or no truck with those who believe that if sterling hit DM2.60 all would be right with their world. "It would be good to have the pound down at its competitive level, whatever that is, say DM2.70/ 2.80, but in fixing it you're not fixing the problems of British industry. You've got to go after that productivity improvement and that's where our focus will be."

Vauxhall's chief executive knows that last year's pay-round drama, centred on a genuine threat to close the Luton plant, has paid off, with the group's market share up from 12.5 per cent to 13.5 per cent. Capacity utilisation is high, and overtime working have been reintroduced at Ellesmere Port.

His aim is to make the British plants the most productive in Europe. He is proud that last year's deal included union agreement to a starter rate at 80 per cent of the standard rate which, he says, enabled Vauxhall to put on a third shift at Ellesmere Port. "We have laid down plans to continue quite an aggressive policy over the next three or four years through more flexible working and increased productivity."

The goal is to retain the British plants when overcapacity in Europe threatens at least one or more closures. So far they are not under threat but Mr Reilly would prefer to see them under the umbrella of the single currency.

He has been an enthusiastic and consistent protagonist of early British entry to the euro but with his new CBI role, he is more nuanced now, reflecting the compromise reached within the main employer's body. "My personal view is that we should make a strong declaration of intent in favour and then be working towards getting the things that need to converge in place." Only pedants, he says, would argue that the conditions will never be precisely right.

They weren't for France or Germany; what matters is to make sure it's not a high-risk venture. And, anyway, the potential benefits are substantial. These range from the elimination of transaction costs, which in Vauxhall's case as part of GM Europe can run into millions of pounds in terms of hedging, to greater transparency in pricing for consumers. "And, for those who are very vociferous about car prices in the UK and Europe, they can't now say exactly what they are," he adds in a sideswipe at the Office of Fair Trading inquiry which, he insists, must take into account varying rates of taxes and the like.

As a GM Europe vice-president he knows too that crucial investment decisions on, say, a new engine plant are rendered that much more difficult for Britain because sterling is outside the euro zone and is subject to risk factors his continental colleagues do not face. "If everything else is equal, that goes against us."

His main argument as someone who has lived in several countries is psycho-political. "There's this feeling that Europe is an economic bloc and anybody who thinks the UK can stand aside and on its own be a strong player in the world economy has got their head in the sand.

"Britain in Europe is far stronger than Britain outside, even tied to the US. We might have a lot of trade with the US but we are not the 51st state . . . If you are in the European club I find it difficult to be in and not part of the currency." In any depression, he adds, it would guard against protectionism and "the risk of us standing outside is we could drop many places down the world economic rankings very fast, without the support of the euroland club".

But Mr Reilly has refused to join the cross-party body, Britain in Europe, which is supposedly campaigning for British entry. "Vauxhall is not a political company. We've made our position clear and I personally don't have the time for another thing. We support what Britain in Europe is doing." He would like a stronger lead from Tony Blair.

Even with the lack of time on his hands, he has no plans to opt for a quieter life. "UK industry is a very exciting place to be. It tends to be ahead of Europe, trying things out first. I've still got a lot I want to do at Vauxhall and in GM Europe."

One clear task is to manage the growing clamour for tougher environmental controls on cars and restrictions on their use. Mr Reilly is unique among carmakers in agreeing to sit on the integrated transport commission of the British deputy prime minister, Mr John Prescott. "As a car person I can say there are significant problems with congestion and so on, and there are things which can be done which are not anti-car ownership, like investing in rail."

Mr Reilly's immediate contribution has been to try to persuade staff not to come to work on their own in their own car but to use public transport. "Okay, it's only one day a month, a Friday, and it's not enough but it's a start."