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• Vauxhall workers agree pay freeze
• BMW recalls thousands of motorcycles for brake check
• Carmakers accelerate production levels
• £750m government funding for UK car and nuclear industries under threat

Workers at Vauxhall's plants in Ellesmere Port and Luton have agreed to a two-year pay freeze as part of a Europe-wide restructuring deal.

The Unite union, which represents Vauxhall workers, has signed an agreement with General Motors, which owns Opel/Vauxhall in Europe.

Workers in Germany have signed a similar deal.

GM said the UK agreement would save it 26.5m euros (£23.1m), with cuts worth 265m euros planned across Europe.

The two-year pay freeze in the UK has already begun, GM said, starting at the beginning of 2010.

Cost savings in GM's UK pension schemes have also been implemented, and a total of 519 jobs have gone from the Luton plant, which makes the Vivaro van, and at the company's headquarters.

European cuts

Vauxhall is currently in talks with Renault to build the next-generation Vivaro as a joint venture at Luton.

No jobs are being lost at Vauxhall's Ellesmere Port plant, which will become the only plant manufacturing the Astra model later this year.

In Germany, Vauxhall's sister brand Opel has agreed cuts worth 177m euros with its workers, with about 4,000 jobs expected to be lost.

A pay freeze has also been agreed, along with cuts to holidays and bonuses.

In return, Opel plans to invest in the development and manufacture of a new small car to replace the Corsa model.

Opel/Vauxhall's chief executive Nick Reilly said the European agreements with workers were "important steps" in the process of creating a new sustainable company.

"Employees demonstrated that they are ready and willing to contribute to the company's future when they are offered security and long-term prospects in return," he added.

General Motors initially planned to sell off Opel/Vauxhall last year as it sought to streamline its operations following the global collapse of the car market.

However, it cancelled the planned sale in November, pledging instead to restructure and invest in the business.

The German manufacturer is recalling six models manufactured between August 2006 and May 2009 in the latest scare to strike a global automotive company.

Around 6,600 motorcycles in the UK are effected by the recall.

No accidents have been reported in relation to the fault, BMW said, and only a small number of complaints have been received.

Nonetheless, the recall, which accounts for roughly a third of BMW motorcycles produced during the period in question, is the second to strike the company in the last two years. A similar fault was identified in 2008, but a BMW spokesman accepted modifications to the brake fluid lines had failed to eradicate problems.

Letters received by British owners of the bikes said vibrations could cause the front brake lines to develop leaks that could allow brake fluid to escape. In a worst case scenario, this could lead to a failure of the front brakes.

According to the company, the fault effects one in 1,000 vehicles. The models recalled include the R 1200 GS Adventure model, the R 1200 GS, the R 1200 R, the R 1200 RT, the R 1200 ST and the K 1200 GT.

BMW, which owns the Mini and Rolls-Royce car brands, sold 20,840 motorcycles in the first quarter of 2010, compared to 265,809 cars.

Shares in the company were unmoved by the recall on Tuesday, as they gained 2.42pc on the Frankfurt market.

The recall by BMW comes just months after Toyota was forced to recall more than 8.5m cars globally and became engulfed in crisis. Billions of dollars were wiped off the Japanese company's market value as US authorities called for an investigation and eventually fined it $16.4m (£11.4m) for being slow to deal with faulty vehicles. Toyota paid the fine on Tuesday.

The number of cars made in Britain increased by 44 per cent last month compared with the same period last year, industry data showed yesterday.

The growth in manufacturing came despite a slowdown in overall sales in the same month.

A total of 98,290 cars were made in April, the Society of Motor Manufacturers and Traders said. Product launches and the introduction of new technologies helped to sustain demand even though there was an expected slowdown following the end of the scrappage scheme, Paul Everitt, chief executive of the society, added.

New car sales rose by 11.5 per cent last month year-on-year. This was less than half the increase in March, which 26.6 per cent.

After a weak start to last year, when manufacturers such as Honda were forced to halt several production sites due to falling consumer demand, the car industry was given a boostby the Government’s “cash-for-bangers” scrappage scheme, which began in May and ended on March 31 this year. The scheme offered discounts to buyers who traded in older cars.

At least 330,000 cars were sold under the scheme — a fifth of all cars sold in the period. The Government estimated that 4,000 jobs with manufacturers and suppliers were supported by the scheme.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “With the car scrappage scheme now at an end and with VAT having risen back up from 15 per cent to 17.5 per cent at the beginning of January, there is a very real danger that private car sales will fall back markedly over the coming months.”

At least £759 million worth of government funding earmarked by Lord Mandelson to nurture Britain’s car and nuclear industry is under threat, The Times has learnt.

It is understood that loans worth £270 million to Vauxhall, £90 million to Sheffield Forgemasters, £20 million to Nissan, and £379 million worth of guarantees to Ford will be reviewed by David Laws, the Chief Secretary to the Treasury.

Mr Laws will decide as early as next week whether the loans and guarantees represent value for money and whether they support a policy that is consistent with new Government’s aims. He is also expected to seek advice from the Treasury’s in-house lawyers about whether the Government can renege on Lord Mandelson’s financial promises.

The review forms part of George Osborne’s plan to cancel unnecessary expenditure commitments and to start paying down Britain’s £163 billion budget deficit with immediate effect. The Chancellor said yesterday that any new spending projects approved since January 1 would be reviewed. The four car and nuclear projects were signed off by the Treasury so will return to the desk of the Chief Secretary for review.

In March Lord Mandelson, the former Business Secretary, unveiled a £90 million taxpayer-funded loan for Sheffield Forgemasters. A spokesman for the company said yesterday that, while the loan had been agreed in principle, it was in the “preparatory stages ahead of the due diligence process”. It is understood that even where there are break clauses — which would cost the Government punitive fees for reneging on a legal commitment — the Treasury would still consider trying to wriggle out of it.

Earlier this year Lord Mandelson managed to secure the medium-term future of Vauxhall’s Ellesmere Port and Luton plants with £270 million worth of loan guarantees for the carmaker’s parent, GM Europe.

In March the Treasury signed off £20 million worth of grants to persuade the Japanese carmaker Nissan to build its new electric vehicle in Sunderland. In the same month Lord Mandelson extended £379 million worth of loan guarantees to Ford UK, which is investing £1.5 billion in Britain to build cleaner car engines.

A Treasury source played down concerns that the funds handed over to car companies, in particular, were at risk: “The point of the review is to see things that were wasted and not value for money. In order for us to reconsider they would have to be considered poor value for money. I have not seen it suggested that they were.”

Should the Government seek to renege on earlier commitments, it would represent an unravelling of much of Lord Mandelson’s interventionist industrial policy, which used a £950 million pot of taxpayer money called the Strategic Investment Fund to help to nurture key business sectors such as green technology, biotechnology, nuclear energy and wind power.

In their first press conference since the election Mr Osborne and his deputy, Mr Laws, expressed their eagerness to start earmarking expenditure cuts immediately. Mr Osborne said that his first Budget would be on June 22. He also indicated that Government departments would be told this week how much of an additional £6 billion in cost savings they would each have to bear.

The Chancellor made it clear that the departments would have to make the cuts within the current financial year. The majority of the savings would be used to pay down the deficit, with some deployed for job creation schemes in a concession to the Lib Dems.

The Chancellor gave details of the new Office for Budget Responsibility (OBR), which is to be chaired by Sir Alan Budd, a former member of the Bank of England’s interest rate-setting committee. Sir Alan has recommended that the Treasury appoint Geoffrey Dicks and Graham Parker to complete the three-member Budget Responsibility Committee. The committee will produce its first economic forecast before Mr Osborne’s Budget next month.

While Mr Osborne declined to be drawn on whether the Government would announce an increase in VAT in the Budget, he hinted that he would stand by a pre-election pledge to cut corporation tax from 28 per cent to 25 per cent and introduce a cut in the tax rate for smaller firms.