GM stalls on Vauxhall and Opel sale plans

GM has been vacillating over whether to dispose of the unit to Magna, a Canadian car company, RHJ, a Belgian private equity group, or complete a restructuring itself.

European unions leaders fear that job cuts could be more drastic in the event of a restructuring or bankruptcy.

The car maker is expected to announce plans for the division after a board meeting on Wednesday afternooon, having come under pressure from the German government to decide the fate of 25,000 Opel and 5,000 Vauxhall workers.

The German government favours Magna and has rejected a sweetened bid from RHJ. It is currently propping up Opel with €1.5bn (£1.3bn) of state aid and is set to finance any deal made with Magna jointly with Russian state bank Sberbank.

Under the terms of the Magna bid, Magna and Sberbank would get a 55pc stake in Opel. GM would hold onto a 35pc stake and Opel workers would get 10pc.

Berlin's concerns over RHJ are not believed to revolve around the terms of the deal, but rather that the investment vehicle could seek to cut costs sharply and offload the asset.

However, GM, which recently emerged from bankruptcy protection, is thought to prefer RHJ. It is concerned about the potential for GM technology getting into the hands of other car-makers.

The German government-backed trust responsible for overseeing the sale plans is to meet on Thursday, suggesting that GM will have made a decision by then. The trustees, including two from GM and two from Germany, will examine proposals from the US carmaker's new board.

Karl-Theodor zu Guttenberg, the German economy minister, has said that he expects a "fundamental decision" this week.

Securing the future of GM Europe by the end of this month has long been a target for the US car maker, but talks seemed to have reach a stalemate. However, Angela Merkel, the German Chancellor, has been pushing for a deal before the German elections later this month.

Germany has indicated that it may be prepared to provide the entire €4.5bn of support required by Magna, and the UK government has suggested it will support a deal if British jobs are protected.