General Motors said yesterday it would stop making cars at its Vauxhall plant in Luton, England from the first quarter of 2002, cutting 2,000 jobs there as it tries to revive its loss-making European business.

Mirroring a similar move by Ford Motor earlier this year, the world's largest motor manufacturer said it was responding to overcapacity in the European car market which is driving down prices and squeezing margins.

The announcement shortly before Christmas is the latest bad news for British auto-workers, who have faced layoffs for much of the past year as car firms try to cut their losses.

The end of carmaking at Ford's Dagenham plant east of London in 2002 will scrap another 2,000 jobs.

The British government pledged to do all it could to soften the blow of the closure, saying it would help retrain and find new employment for workers at the Vauxhall plant and carparts companies who lose their jobs.

Closure of the Vauxhall Luton car plant, which employs 2,500 people, is part of a sweeping global restructuring announced yesterday by General Motors which includes cutting the company's salaried workforce in North America and Europe by 10 per cent and phasing out its venerable Oldsmobile brand.

Some 5,000 jobs will be cut over the next 18 months in Europe where the carmaker is facing price pressures.

The European operations swung from a $32 million profit (#36.4 million) to a $181 million loss in the third quarter and the company said it expected a much larger loss over the next three months.