UK Government Still Open To Magna Financial Support

The U.K. government remains open to providing financial support to Austrian-Canadian auto-parts maker Magna International Inc. (MGA) but only in return for maintaining long-term production at U.K. unit Vauxhall.

"The U.K. government has made it clear that it is willing to commit funds but this will have to be on the basis that the Magna proposal is a complete, long-term sustainable and commercial plan that recognizes the logic of maintaining long-term production in the U.K.," a spokeswoman at the Department for Business, Innovation and Skills said Friday.

U.K. officials have expressed doubts about Magna's plans to take over carmaker Adam Opel GmbH, which was formerly the European unit of General Motors Co.

General Motors said last month it would sell Opel, as well as sister brand Vauxhall, to Magna and Russian bank OAO Sberbank (SBER.RS).

It is feared Vauxhall's Ellesmere Port unit could shoulder a significant share of the job cuts.

The U.K. government has sent a representative to a meeting in Berlin Friday with officials from Belgium and Germany.

Germany's federal and state governments have promised a total of EUR4.5 billion in loans and guarantees, but want to gradually reduce that contribution with support from other European countries where the carmaker has operations. Opel has plants in Germany, Spain, Belgium and Poland. Vauxhall has plants in the U.K.

Business Minister Pat McFadden has sat down with union leaders and Magna's co-Chief Executive Siegfried Wolf in recent days and Business Secretary Peter Mandelson will be speaking with senior Magna officials later Friday.

The spokeswoman confirmed that the government has hired consultancy firm PriceWaterhouseCooper to carry out due diligence of Magna's plans to gauge what level of taxpayer support might be appropriate.

But while the government hopes Vauxhall's situation can be resolved as speedily as possible, the spokeswoman said no decisions on support can be made until Magna clarifies its plans for the U.K. unit and the European Commission completes its state aid review of Magna's takeover of GM's European units.

European Commissioner for Competition Neelie Kroes wrote to the U.K. government this week saying it is studying whether Germany's EUR4.5 billion loan to Magna broke state aid laws.

The U.K., Spain and Belgium have all contacted the European Union on state aid concerns.

-By Laurence Norman, Dow Jones Newswires; [phone]; [e-mail]