Tuesday, September 27, 2005

Volkswagen decides to build new SUV in Germany

Associated Press

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BERLIN -- Volkswagen AG announced Tuesday it would build its new sport-utility vehicle in Germany after the company's labor groups agreed to cut production costs to keep it from being built abroad.

VW management had suggested the new vehicle, the Marrakesh, might be built in Portugal rather than Germany. It has insisted the SUV could only be built at its main Wolfsburg plant at costs below those laid out in existing wage agreements.

Wolfgang Bernhard, the chief executive of the VW brand, said Tuesday he had achieved his aim of reducing production costs by 850 euros ($1,026) per vehicle in talks with employee representatives and the IG Metall labor union.

"For everyone involved, this was not an easy path," Bernhard said. "The main thing is that we can now produce and export the vehicle in Germany under competitive conditions."

Bernd Osterloh, the chief employee representative at the company, said the agreement secured work for more than 1,000 people.

The new model will be produced by the Auto 5000 GmbH unit, where lower wages than elsewhere in Volkswagen apply. Employees also can be required to work extra hours.

Volkswagen management also pledged that a new model would be built at another German plant, in Emden, starting in 2008. The company did not say which model it would be, but Dow Jones Newswires, citing an unidentified manager at the Emden plant, said it would be a coupe version of VW's Passat line.

The company is in the midst of a cost-cutting drive aimed at shoring up its earnings amid criticism from investors that it is inefficiently run.

VW announced plans this month to cut its work force in Germany, complaining that its factories have "several thousand" surplus employees despite rising demand for its cars.

Volkswagen shares edged up 0.4 percent to 51.65 euros ($62.37) in early afternoon trading on the Frankfurt exchange.

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