VW to spend over $1 billion on new Polish van factory

WARSAW/BERLIN Tue Mar 18, 2014 12:59pm EDT

A general view of the Volkswagen plant in Chattanooga,Tennessee February 14, 2014. REUTERS/Christopher Aluka Berry

A general view of the Volkswagen plant in Chattanooga,Tennessee February 14, 2014.

Credit: Reuters/Christopher Aluka Berry

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WARSAW/BERLIN (Reuters) - Volkswagen (VOWG_p.DE) will spend nearly 3.4 billion zlotys ($1.1 billion) on a new factory to build the Crafter delivery van in Poland, moving output out of high-cost Germany in the company's biggest-ever commercial vehicle project.

With construction due to start at the end of 2014, the new plant in Wrzesnia, Poland, will employ more than 2,300 people and start assembling the Crafter model in the second half of 2016, VW said on Tuesday.

VW also shuffled production at some other sites.

Production of the Crafter is currently based at two German plants of rival Daimler (DAIGn.DE) which have been making the van since 2005 under a co-operation accord with VW that is due to expire at the end of 2016.

"By taking the decision to build the Crafter in Poland, we are setting the course for the strategic realignment of our light commercial vehicles," Leif Oestling, head of VW's trucks business, said in a statement.

Shifting production to Poland will allow the German group, which already makes the Caddy and T5 commercial vehicles near Poznan, to significantly reduce its production costs.

Labor costs in Poland's manufacturing industry amounted to an hourly 6.65 euros per worker in 2012, about a sixth of the 36.98 euros in Germany, according to the Cologne-based IW economic institute.

The impact on employment in Germany, if any, was unclear as Daimler intends to use the capacity so far devoted to making the Crafter to expand production of its own equivalent model, the Sprinter, and that was the reason for it to discontinue its agreement with VW.

Poland's zloty currency edged higher in light trade after the announcement, as traders priced in an inflow of euros to Poland in the coming quarters.

Europe's biggest automaker has been adding capacity abroad, especially in lucrative Chinese and North American markets, to beef up its network of over 100 plants worldwide.

VW's two Chinese joint ventures will invest 18.2 billion euros in new plants and products through 2018 while luxury division Audi is spending over 1 billion euros on facilities in Mexico and Brazil as it aims for the first time to build more cars outside Germany than within its home country in 2014.

Sports-car maker Porsche, fully acquired by VW in 2012, will spend another 220 million euros on facilities at its plant in Leipzig to make the bodies of the Panamera coupe from 2016, Chief Executive Matthias Mueller said at a news conference in Stuttgart. It spent 500 million euros last year to upgrade the site for production of the new Macan SUV model.

VW said on Tuesday that production of the four-door Panamera will be focused at the eastern German site, stripping its commercial-vehicle plant in Hanover of an order to make and paint bodies for the Porsche model.

Conversely, Porsche will move production of its top-selling Cayenne SUV out of Leipzig to VW's plant in Bratislava, which has been making the bodies and interior for the model's final assembly in the eastern German city, Porsche said.

In another move, VW said it will expand production of the Tiguan compact SUV to Hanover from 2016.

The move will ease strains on VW's key plant in Wolfsburg where production of the Tiguan, one of VW's top-selling European models, is based and has been requiring additional shifts for several quarters.

(Additional reporting by Ilona Wissenbach; Editing by Greg Mahlich and Anthony Barker)

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