Brazil to Build Unique VW

Volkswagen AG will invest 2.7 billion Reals ($1.4 billion) in Brazil . The loan from BNDES will help the German carmaker meet the 1.6 billion Reals cost of re-tooling the ageing factory and develop a new product to sell alongside its low-cost Gol range, made in Brazil for two decades.

The project to modernise the Sao Bernardo plant is the centrepiece of Volkswagen's plans to invest in Brazil, where it has five factories.

"We will introduce a new product that will be positioned below the Golf and above the Gol," said Demel. "This new line will be a worldwide product, which, if we are economically competitive, also will be an export product."

Demel has talked previously about VW's plans to develop a new model to sell alongside the Gol range, the carmaker's top seller in a $26 billion market of which it has a leading share of about 30 percent. The new vehicle will be based on the Fabia sub-compact made by VW's Czech unit Skoda, he said in an interview in April.

VW will keep making its Gol range of cars, even though the design for the "people's car" sold only in Latin America is now getting long in the tooth.

Gol range cars account for 25 percent of cars sold in Brazil, Demel said. VW intends to export 30 percent of the output of the new family of cars from the new design project, code named PQ-24.

In its heyday in the 1970s, VW employed 37,500 workers at Anchieta. Brazilian production of cars began in the VW factory. The staff consumed 10,000 litres of coffee, 8,000 litres of juice, 1.5 tons of sugar and a ton of kidney beans a day.

VW will increase automation at the factory, which now employs about 19,500 workers, increasing the number of robots working in the bodywork assembly plant to 300 from 50 over two years. The work of modernising the plant, which produces Santana sedans and Kombi vans as well as Gols, will finish in 2004.

Demel didn't comment directly on those figures, saying only that, as a rough guide, the company would invest 3.5 billion Reals in Brazil over five years.

Thanks to Pete Frost (Mexican and Brazilian VW register)