ONE of Britain’s largest car-parts groups, Wagon Automotive, is on the brink of collapse this weekend, threatening 4,500 jobs across Europe.

The crisis at Wagon, a quoted group controlled by American billionaire Wilbur Ross, underlines the automotive downturn and will add to fears over the UK’s growing unemployment total. Around 11,000 jobs in industries from financial services to retail were lost last week.

Administrators are expected to be appointed within days at Wagon, which employs more than 500 in the UK. Zolfo Cooper, the corporate restructuring group that was part of Kroll, has been lined up for the job.

Wagon’s problems could also prove embarrassing for Gordon Brown. The company’s banks are led by Royal Bank of Scotland, which is now majority-owned by the government.

Senior motor industry sources said the firm’s fate was sealed when the banks declined to contribute €12m (£10m) to a €50m funding package that would have kept the firm running for another three months.

Its carmaker clients had put up €30m, and Ross was understood to have been ready to contribute €10m via the purchase of one of Wagon’s subsidiaries. The rescue talks fell through when the banks, which had agreed €155m loans in the summer, declined to put in more.

It is understood that only the UK operation will be put into administration this week, with the fate of the European plants still to be decided. All the plants are likely to keep working while buyers are sought.

Wagon, which has an annual turnover of £860m, has plants in Walsall and Coventry and a head office in Birmingham. At Walsall, it makes panels and door parts for Honda, Ford, General Motors, Land Rover and Nissan.

At Coventry, Wagon makes shock absorbers for non-automotive clients, including the liftmakers Otis and Schindler. The remaining 4,000 staff work at 20 plants on the Continent, where its biggest clients are Renault, Peugeot and Citroën.

The company traces its roots back to Wagon Repairs, a company set up at the end of the first world war to maintain railway rolling stock.

It was chosen by Ross, the American tycoon who made his fortune by investing in “sunset” industries like coal and steel, as the foundation for a European car-parts empire.

However, despite making acquisitions — Ross engineered the takeover of rival Oxford Automotive in 2006 – Wagon has struggled in the face of competition from low-cost rivals and a car-market slump.

Investors turned their back on a rescue rights issue in August, leaving Ross to pick up most of the shares and take his stake in the company to 85%. The €155m bank funding was agreed in return for Ross agreeing to underwrite the new shares.

The capital injection was not enough however, and sources close to the company say it has been buffeted by three cuts in production by carmakers in quick succession.

The shares were suspended on October 13, and 10 days ago Ross stepped down from the board “in order that he can consider how best he can offer assistance to the company both in connection with its ongoing discussions with its lending banks and as a representative of its principal shareholder”.

Times Recommends

• Toyota recalls 437,000 cars including Lexus
• Myners says bonuses are bleeding pension funds
• Japanese company faked safety reports on seats