Lord Mandelson succeeded yesterday in forcing the new owner of Vauxhall to back down on onerous redundancy plans, effectively securing the jobs of 5,000 British workers.

Magna International committed itself to the long-term future of Vauxhall’s Ellesmere Port plant and agreed that it would try to find another vehicle to produce at the Luton site to secure its future after 2013.

The Business Secretary will now begin final talks with the German Government over how much Britain will contribute to Berlin’s €4.3 billion (£4 billion) state aid funding pot. It is estimated that Lord Mandelson is prepared to negotiate up to £400 million of loan guarantees.

While he has won a pledge from Magna that there will be no compulsory redundancies for any Vauxhall workers, there is still doubt over the terms of the deal for GM Europe as a whole. Uncertainty remains because Neelie Kroes, the European Competition Commissioner, is understood to be concerned about the terms under which Angela Merkel has offered state aid to secure German jobs.

Brussels is in talks with Berlin over the legality of a state aid deal struck between Opel, part of GM Europe, and Magna. Should Ms Kroes rule that Berlin’s behaviour breaches state aid rules, she could force Magna to repay German funds, with interest. Such a move could see part of Magna’s deal over job commitments unravel.

Vauxhall said yesterday: “Following extensive and constructive dialogue between Vauxhall Motors, Magna International, Unite and the British Government, we are pleased that the parties have secured an agreement that protects the jobs and prospects of the 5,000 Vauxhall staff in the UK.”

The future of both plants had been in the balance after the recent sale of General Motors’ Vauxhall division to Magna, of Canada, and Sberbank, the state-owned Russian lender.

“Both the Ellesmere Port and Luton manufacturing operations will retain security of production [and] maintained as a key manufacturing operation until at least 2013, with consideration given to a future model at the plant beyond that date,” Vauxhall said, adding that there would be no forced redundancies.

“Cost-saving and efficiency measures will be implemented, which include a two-year pay freeze and other measures, and past employee sacrifices will be recognised.”

Lord Mandelson said that there was “some way to go” before the Government agreed to offer financing to Magna. He said: “I need to be convinced that the terms and conditions for the financing will be of the sort and standard that the Government expects when we put the taxpayer money into a company like this. We don’t sign a blank cheque.”

It emerged this month that Magna was preparing to dismiss 20 per cent of the Vauxhall workforce and slash production at Ellesmere Port. Unite, the union, estimated that under the proposals a third of Ellesmere Port workers would have been sacked. The plans included proposals to reduce production at Ellesmere Port to 120,000 units. Yesterday, it emerged that production there will be cut to just 148,000 units.

The plant makes the Vauxhall Astra and has the contract to make a new model, to be rolled out across Europe.

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