U.K. Business Secretary Peter Mandelson said the government would need to be "realistic" about the outcome of talks over the future of General Motors Corp.'s (GMGMQ) U.K. unit Vauxhall.

Mandelson met earlier Thursday in Berlin with Siegfried Wolf, co-chief executive of Canadian-Austrian auto parts supplier Magna International Inc. (MGA), which is the preferred bidder for GM's European units.

"When you only have one player in a game like this you have to be realistic. You neither want to have terms dictated to you, because you have nowhere else to look...but you also have to accept that Magna's own interests might be revised," Mandelson told the BBC.

In comments to Sky News television, Wolf signaled his company was looking to continue production at Vauxhall but offered no guarantees for the firm's roughly 5,000 workforce.

"There is a lot of potential in England and every job which is lost is one too much," he said. "I'm quite happy to find a way where, at the end of the day, it is a competitive environment where we can produce and continue with Vauxhall."

On May 30, the German government selected Magna as a partner for GM's German unit Opel and agreed to provide EUR1.5 billion in bridge financing, paving the way for a takeover by Magna and its two Russian partners. The deal would leave Magna in charge of GM's other European units, including Vauxhall, and there are fears of large-scale job losses at the U.K. unit.

After the German government picked Magna, Mandelson said he would seek an early meeting with the company to discuss Vauxhall's future. At the time, Mandelson said he had already received commitments from Magna that they would maintain some production at GM's U.K. units if their bid was accepted.

Since then, however, Mandelson's position on the Magna takeover seems to have hardened.

In an interview with Germany's Handelsblatt newspaper published Thursday, Mandelson said he hoped to see a pan-European solution for the European units of GM.

"With the Canadian-Austrian parts supplier Magna we have a preferred bidder, but not a final buyer," he was quoted as saying. "In this case, more and better bidders might have been a better solution."

The U.K. government has made it clear it is prepared to offer longer-term financial support to Magna if the company's plans for Vauxhall are considered appropriate.

However, with Magna officials only recently starting to carry out due diligence at Vauxhall, a spokeswoman for the U.K. government's Business Department said it is too early for any decisions to be made on financing. Magna will first have to present "clear plans," she said.

Mandelson will also Thursday meet German Economics Minister Karl-Theodor zu Guttenberg.

-By Laurence Norman, Dow Jones Newswires 0207-842-9270, laurence.norman@dowjones.com

(Natasha Brereton contributed to this article.)