VW To Invest $2 Billion In Mexico Over 5 Yrs To Boost Output

MEXICO CITY January 9, 2003;Dow Jones reported that Volkswagen AG plans to invest $2 billion in Mexico over the next five years to revamp local facilities and accommodate production of its new Bora/Jetta model, a company official said Thursday.

Reinhard Jung, head of Volkswagen's Mexico operation, said at a press conference that the new Bora/Jetta model will only be manufactured at the company's Puebla plant, and exported to Europe, the U.S. and other key markets.

The plant expansion will create 1,500 direct jobs, and between 4,000 and 5,000 indirect jobs, mostly in the domestic auto parts industry, Jung added.

The investment plan includes $180 million for the production of the new models, of which Volkswagen plans to be producing 300,000 a year by 2005.

The Puebla plant, located 60 miles east of Mexico City, is also the only production site of the New Beetle and its new convertible version, the Beetle Cabrio.

Volkswagen is Mexico's third-largest car manufacturer after General Motors Corp. and Daimler-Chrysler AG .

Volkswagen is taking advantage of Mexico's free-trade agreements with the U.S., Canada and the European Union, as well as recent pacts signed with Argentina and Brazil, Economy Minister Luis Ernesto Derbez said at the press conference.

The company imports auto parts, as well as complete units of its cheaper Gol/ Pointer and Polo/Derby sedan models for the Mexican market, Derbez said.

Jung said total annual output at Puebla is expected to increase to 430,000 units in 2005 from the 332,000 last year. With the launch of the new Beetle Cabrio, production is expected to rise to 350,000 units this year.

Exports from the Puebla plant are expected to increase to 300,000 units in 2003 from 270,000 units last year.