Volkswagen Guarantees 4.2 Billion Euro Investment in Spain, Minister Says

9 years ago - 13 October 2015, Automotive News

Volkswagen Group has guaranteed a 4.2-billion euro ($4.8 billion) investment in its Seat brand and VW plants in Spain, despite vowing to cut costs to cover the expense of a scandal over rigged emissions tests.

"Yesterday I had a meeting in Germany with the [VW] chairman and he guaranteed the investments planned for Spain would be maintained," Industry Minister Jose Manuel Soria told La COPE national radio on Friday.

VW, which has admitted to cheating in U.S. diesel emission tests, pledged the multi-billion euro investment over five years for the Seat brand factory in Martorell outside Barcelona -- Spain's biggest car plant -- and the VW-brand factory in Pamplona.

Seat’s Martorell plant builds the Leon, Ibiza and Altea models alongside the Q3 SUV for fellow VW brand Audi, according to Automotive News Europe's interactive assembly plant map. In Pamplona, VW builds the Polo hatchback.

VW said on Tuesday that it would need to make "painful cutbacks" to overcome the consequences of the emissions scandal.

VW is an important employer in Spain, representing around 22,000 jobs. Spanish assembly plants are winning new models and creating jobs in a country with one of the highest unemployment rates amongst developed countries.

Unemployment will be a major theme in general elections on Dec. 20 where the ruling center-right People's Party is fighting for re-election in a closely-run contest with the opposition Socialists and newcomer parties.

Spain has no domestically-owned carmakers -- Volkswagen bought Seat from the state in 1986 -- but the overall industry accounts for almost 10 percent of economic output and employs around 9 percent of the workforce.

Billions of euros have been wiped off the German group's value following the revelation that it used software to change its diesel engines' performance under U.S test conditions.