General Motors (GM) has said it won't sell its Vauxhall and Opel brands to Canadian firm Magna.
GM said it had made the dramatic U-turn because of 'an improving business environment for GM over the past few months'.
Improving business environment
Fritz Henderson, GM's president and CEO, said: 'The business environment in Europe has improved and, at the same time, GM's overall financial health and stability has improved significantly over the past few months, giving us confidence that the European business can be successfully restructured.
'We are grateful for the hard work of the German and other EU governments in navigating this difficult economic period.'
News welcomed in the UK
Business secretary Lord Mandelson said: 'I have always believed that if the right long-term sustainable solution is identified, then the Government would be willing to support this.'
Unite, the main union at Vauxhall, had negotiated a deal with Magna to limit job-losses at the two Vauxhall factories in Luton and Ellesmere Port to just 600 workers.
Tony Woodley, secretary general of Unite, said: 'The decision is in my view a fantastic decision and the right decision for General Motors themselves.
'There's no logic in breaking up the company. I believe it is the right decision in spite of a good deal that we'd struck with Magna.'
However, Mr Woodley admitted that the future of British jobs was still unclear, but that it would be better to negotiate with 'the devil you know'.
Germany angered by U-turn
The German authorities will be angered by the news, after Magna had given assurances, in return for 4.5 billion (4 billion) in state-funded loans, that all of GM's Opel factories would remain open.
Government spokesman Ulrich Wilhelm said that the German government would require GM to repay 1.5 billion (1.3 billion) that has already been loaned by German banks.
Opel employs 54,000 workers across Europe, with 25,000 based in Germany.
Siegfried Wolf, Magna's Co-Chief Executive Officer said: 'We understand that the Board concluded that it was in GM's best interests to retain Opel, which plays an important role within GM's global organisation.
'We will continue to support Opel and GM in the challenges ahead and wish to thank everyone who supported the Opel restructuring process for their tireless efforts and dedication over the past several months.'
GM's original decision to sell its Opel and Vauxhall brands was made after it announced a group-wide loss of $30.9 billion (around 27 billion) for 2008, after its sales plunged in the global recession.