GM ponders future as deal fails

General Motors’ bondholders have rejected a key part of the carmaker’s restructuring plan, which makes it more likely to seek bankruptcy protection.

The board will now meet to discuss its “next steps” after a large number of investors refused to exchange their debt for company shares.

Meanwhile, the German government is set to begin a series of meetings later to consider bids for GM’s Europe arm.

Four bidders are currently in the running for Opel and UK’s Vauxhall.

Owner General Motors will have the final say, but the German government’s backing is crucial, as GM would struggle to do a deal without it.

But a spokesperson for UK Business Secretary Lord Mandelson said GM wanted to keep talking with all bidders. All had committed to maintain Vauxhall production in the UK, he added.

Bidding war

German Chancellor Angela Merkel will be meeting GM representatives and US government officials at 2000 BST on Wednesday night.

Her government is being asked to put up hefty loan guarantees for the winning bidder for GM Europe, so its backing could sway US parent GM’s ultimate decision on who to sell to.

This is because Opel has its headquarters in Germany, and 25,000 of the firm’s 50,000 workers are employed in the country.

The four bidders for GM Europe are Italy’s Fiat, Canada’s Magna, Belgium’s RHJ and China’s Beijing Automotive Industry Corporation (BAIC).

With an election looming, Berlin does not want to see too many job losses arising from the takeover.

Magna says it will lay off 2,500 workers in Germany, while Fiat says it will cut 10,000 jobs across Europe, including 2,000 in Germany.

BAIC, however, says it will not cut any jobs for at least two years.

But the takeover will also affect 5,000 Vauxhall workers at plants at Ellesmere Port and Luton in the UK, and there are fears that the German government’s influence could prejudice UK jobs.

Derek Simpson, general secretary of the Unite union in the UK, fears the Germans will support a bid which offers no protection to British workers.

The UK government has said it might consider making a financial contribution to help secure the future of Vauxhall.