BERLIN/LONDON (Reuters) - Initial talks between the German government and carmakers PSA PEUP.PA and General Motors GM.N have led to some encouraging signs that jobs at Opel factories will be preserved, though no guarantees have been made yet, a top official said on Monday.

In contrast, a source close to Britain’s biggest trade union said it was increasingly concerned about the future of Vauxhall plants in England, should Peugeot-maker PSA seal a deal to buy GM’s European Opel/Vauxhall arm.

Europe’s car industry has been dogged by overcapacity for years, and analysts have said the planned sale of GM’s loss making European business to France’s PSA is likely to result in some cutbacks.

Two sources close to PSA told Reuters last week that job and plant cuts were part of the tie-up talks, with the two Vauxhall sites in Britain in the front line.

Britain’s decision to leave the European Union, which could lead to trade tariffs, could be a factor in the decision, although the country’s politicians and unions are lobbying hard.

Of GM Europe’s roughly 38,000 staff, around half are in Germany and about 4,500 in Britain.

German Deputy Economy Minister Matthias Machnig said on Monday GM and PSA had so far not given any binding guarantees on German jobs, but that there had been some encouraging signs.

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“This is why speculation is premature at this point,” Machnig told German television station ARD. He expressed hope that a combination with France’s PSA could form the basis of a better future for Opel.

German newspaper Bild am Sonntag had reported that PSA had pledged to continue operating all four of Opel’s German production sites.

That sent alarm bells ringing in Britain.

“We are increasingly concerned after reports that German plants are safe,” the trade union source told Reuters, adding the head of the Unite union, Len McCluskey, was likely to meet PSA Chief Executive Carlos Tavares in London on Friday.

However, British business minister Greg Clark said PSA executives had told him they valued the Vauxhall brand and prided themselves on not closing plants. In evidence to lawmakers, he added PSA was not in a position to give guarantees as it was still in talks with GM.

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HIGH STAKES

Germany will hold a federal election in September and any major job cuts at Opel could weaken the chances of Chancellor Angela Merkel getting re-elected for a fourth term.

Merkel is constantly being updated on the progress of talks between the government and the management of the carmakers, government spokesman Steffen Seibert said during a regular news conference in Berlin on Monday.

Economy Minister Brigitte Zypries will discuss the planned deal in talks with her French counterpart Michel Sapin during her visit in Paris on Thursday, a ministry spokesman said.

He added Berlin was also in contact with the British government and the two countries would not let themselves be played off against each other.

British business minister Clark is due to meet PSA’s Tavares “towards the end of the week,” a government source said, in a key test of Britain’s ability to retain investment after its Brexit vote in June.

Last year, Japanese carmaker Nissan 7201.T asked for a pledge of compensation if its UK plant was hit by Brexit, but went on to invest in two new models after what a source described as a government promise of extra support to counter any loss of competitiveness.

British Prime Minister Theresa May also plans to speak with Tavares and is determined to protect Britain’s car industry, her spokesman said on Monday.

“It’s going to be a private conversation. There’s been a request for a meeting and we will try to make that meeting happen, but I am not going to go into what the nature of that conversation will be,” he told reporters.