The prospect of a bonfire of British jobs loomed over Vauxhall Motors yesterday as workers at the British division of General Motors contemplated their future within the embrace of Italy's Fiat Group.

Unions fear that Fiat will hope to cut costs by closing facilities in Britain if it succeeds in taking over GM Europe. Fiat is already under pressure from Italian unions not to to cut jobs and powerful German labour groups are also seeking assurances over employment.

Tony Woodley, general secretary of the Unite union, said: “I'm concerned about Fiat ... Quite frankly, they're another European competitor with plants and, as everybody knows, there's overcapacity.”

Mr Woodley believes that GM Europe requires more funding than Fiat is capable of providing. Vauxhall previously had asked the Government to provide £600million as its contribution to the bailout of GM Europe.

Vauxhall, which employs 5,000 workers at its plants in Luton and Ellesmere Port, has moved to a four-day week in response to plummeting car sales. The Ellesmere Port plant offered its 2,200 production staff a nine-month sabbatical on 30 per cent pay, which it soon improved to 50 per cent. Only 15 workers took the company up on its offer.

Michael Tyndall, a Nomura International analyst, said that the most forceful opposition to the deal would come from German and Italian unions.

“It's all very well to say [Fiat and Opel] compete broadly in the same markets with similar platforms and there may be economies of scale, but the broad translation of ‘economies of scale' is ‘fewer jobs' and I'm not sure if the Italian or German governments have the appetite for the job losses a merger would entail.”

Other industry-watchers said that the proposal by Sergio Marchionne, the chief executive of Fiat, would secure British jobs in the short term. Howard Wheeldon, senior strategist at BCG Partners, said: “If the Marchionne plan is to go ahead, in the short to medium term Vauxhall workers should consider themselves safe. The Marchionne dream is to become the second-largest car manufacturer in the world, so therefore he will want the UK interest as much as the German interest.”

Mr Wheeldon added that in the long term the Vauxhall plants in Ellesmere Port and Luton would be under threat if their cost base proved to be higher than in Germany.

Mr Marchionne said that Fiat would ask the Government to offer loan guarantees. A spokesman for the Department for Business, Enterprise and Regulatory Reform said that the department was in discussions with GM and was “in close contact with the US and German governments”.

Vauxhall was founded in 1857 in the South London area of the same name and began its life as a manufacturer of pumps and engines. It built its first car in 1903 and moved production to Luton soon afterwards.

It was taken over by General Motors in 1925. It began making Bedford Trucks in the 1930s: it made 250,000 of them in the Second World War, as well as several thousand Churchill tanks.

Its fortunes began to wane in the postwar years, but in the 1970s the company re-emerged with the era-defining Chevette and Cavalier models, which drove sales through the 1980s. In 2000, GM decided to halt production at the Luton plant, resulting in the loss of 2,000 jobs, although van production continues at the factory.

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