MADRID Japanese group Nissan Motor (7201.T) is to invest 130 million euros ($178 million) at its factory in Barcelona to make a new model, the latest sign of returning confidence in Spain's competitiveness.
While Europe's car market has been suffering in the downturn - sales fell to a 17-year low in 2012 and latest data showed little hope for a recovery anytime soon, Nissan hopes to benefit from a recent deal with unions on wage cuts.
"This good news ... is a result of the competitiveness agreement we reached last week and that we had already said would open doors to new opportunities," Frank Torres, director general of Nissan Motor Iberica, said on Monday.
Nissan will make 80,000 of a new compact family car per year at the Barcelona plant, creating 1,000 direct jobs and 3,000 indirect jobs.
The government has said recent investment by automakers was a sign that labor market reform, which gave firms more power to hire and fire workers and greater wage-negotiation flexibility, has made doing business in Spain more attractive.
In January, Volkswagen (VOWG_p.DE) became the third car maker in recent months to increase production in Spain.
Nissan also said it would produce 24,000 of its 1tn Pick Up model a year in Barcelona, as well as gearboxes for its electric LEAF and eNV200 models. These projects will receive 20 million euros of the 130 million Nissan is investing in the plant.
The company exports 80 percent of the cars made in Barcelona. This shields it from a lagging Spanish market, where car sales have plummeted as a result of high unemployment, low consumer confidence and economic uncertainty.
"In coming years, the Barcelona plant will work at full capacity, with annual production of over 200,000 units ... Taking into account the current crisis, this is not just an achievement for Nissan but for industry in Spain," Torres said.
In Spain, the government has introduced a car subsidy program to bolster the market, which remains depressed in a drawn-out recession. Spanish manufacturing activity declined for the 21st straight month in January, but at the slowest pace since June 2011 thanks to increased overseas business, data showed.
Nissan employs 4,700 people in Spain, at three production plants. The company said it would stop producing industrial vehicles and 4x4s at Barcelona because sales have been hit by the ongoing euro zone debt crisis.
Spain's unemployment rate hit 26 percent in the fourth quarter of 2012.
(Additional reporting and writing by Clare Kane)