Lord Mandelson is offering £500 million in loans and loan guarentees to whichever bidder offers the most secure future for Vauxhall in Britain.

The news throws up another twist to the protracted negotiations over what will happen to General Motors’ European operations.

It emerged yesterday that GM’s US board is split down the middle over whether to retain Opel and Vauxhall. Half the board believe the European operation should now be kept as it could become a future competitor in the future. However, the other half believe GM should wash its hands of Vauxhall and Opel and just move on.

The Times said Lord Mandelson is insistent that the party that receives taxpayer funds will be the one that produces a business plan protecting most of Vauxhall’s 5,000 strong workforce for the long term.

While speculation is rife, GM has declined to comment officially on its intentions over a decision for GM Europe’s future.

GM delayed its decision to choose Magna or RHJ as the preferred bidder for GM Europe. A decision was expected on August 21. A decision is now expected to be made before the Frankfurt Motor Show on September 15.

The US Government will not offer more funds in addition to the £36 billion it has already given to lift GM out of bankruptcy protection. Some board members at GM are looking to secure funds to retain Vauxhall and Opel from other governments in Germany, Britain and Spain instead.