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Year-end blow: car axe falls on Luton

General Motors' decision to shut Vauxhall's Luton car plant in spring 2002 is a major setback for the motor industry in the UK. Ford will cease Fiesta production at Dagenham – and in Britain – at the same time.

Production of Vectra at Luton will be cut to a single shift next month but a Vauxhall statement said Ellesmere Port would continue to produce Astra. A study has been ordered to find out whether Ellesmere Port could become a two-model plant, and build Vectra as well as Astra.

The Luton decision is part of a GM restructuring plan which will cut build capacity in Europe by more than 400,000 units between now and 2004.

GM and Ford are acting to staunch losses in Europe which has emerged as the global economic trouble area for the automotive industry. In October, GM forecast a “significant” fourth-quarter loss in Europe, after a £130m deficit in the third quarter.

The Government came under immediate pressure from Labour MPs to make funds available to try to save the 2,500 jobs at Luton.

Vauxhall plans to transfer hundreds of car assembly jobs to its adjoining van plant at Luton. Vectra is due to be replaced next autumn and production changes were scheduled to be made during the 2001 summer shut-down.

The Luton factory was seen by industry analysts as among the most secure in Europe. GM's decision follows a series of assurances that it was safe and after substantial investment. In the spring, Vauxhall said it would spend around £32m to boost productivity and efficiency at the Vectra plant.

Ford's announcement to end car production at Dagenham is believed to have prompted its US multi-national rival to rethink its European operations.

Over-capacity within the EU prompted Ford to move production of the new Fiesta to Germany. GM is facing low demand for the Vectra and will build its replacement in Germany and Holland.

Up to the end of November, Vauxhall registered 66,207 Vectras in the UK, making it the seventh best seller. Vectra faces even fiercer competition from Ford's new Mondeo, and the decision suggests GM is doubtful whether UK volumes could support assembly in this country.

Closing the Luton assembly line will have another and potential damaging knock-on effect. Japanese carmakers, already sceptical about the UK as a base to build cars because of the euro dilemma, may be prompted to take a tougher line.

Vauxhall was poised to become Britain's largest producer of vehicles in 2001 by going through the 300,000 barrier. Society of Motor Manufacturers and Traders figures show Vauxhall produced 246,784 units up to the end of October, topped only by Nissan's 277,590.

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