Volkswagen to invest $577 million in Brazil auto plant

FILE PHOTO: A car with the Volkswagen VW logo badge is seen on display at the North American International Auto Show in Detroit, Michigan, U.S., January 16, 2018. REUTERS/Jonathan Ernst

SAO PAULO (Reuters) - Volkswagen VOWG_p.DE will invest 2.4 billion reais (£474.5 million) in one of its Brazil factories, Sao Paulo state governor Joao Doria said on Thursday during a visit to the automaker's headquarters in Germany.

Sao Paulo state is the heart of Brazil’s auto industry, although its relevance has been in decline in recent years as other states have offered more generous tax incentives.

Doria’s governorship, however, has been marked by a strong push to attract and retain manufacturing plants in Sao Paulo. Earlier this year, he introduced a tax plan for automakers granting them a 25% reduction in value added taxes as long as they invested at least 1 billion reais and created 400 new jobs.

Sao Paulo state said in a statement that Volkswagen would create 1,000 jobs and invest in its Sao Bernardo do Campo plant, in a city that is the historic centre of Brazil’s auto industry.

The incentive plan was created when General Motors, Brazil’s market leader, hinted late last year that it might close or severely reduce its operations in the state as it warned of heavy losses.

Other automakers have also made moves in their Sao Paulo operations.

Ford announced this year that it would close its Sao Bernardo do Campo plant, its oldest in the country, which would cost almost 3,000 jobs.

Doria responded by offering to find a buyer for the plant, and while domestic automaker CAOA entered negotiations with Ford regarding a possible purchase, no formal announcement has been made.

Reporting by Marcelo Rochabrun and Aluisio Pereira; Editing by Dan Grebler