VAG Slovakian Plants that build Audi Q7's receive State Aid

Volkswagen AG, Europe’s largest carmaker, will receive aid from the Slovak government should it expand its main factory in the country, which is set to adopt the euro in two weeks.

The Cabinet approved today the carmaker’s request for as much as 431 million koruna ($20 million) in tax relief, the government said in a statement. In exchange, Wolfsburg, Germany- based Volkswagen would have to invest as much as 300 million euros ($423 million) to upgrade the factory in the capital Bratislava and produce at least one new model.

By expanding in Slovakia, Volkswagen would benefit from wages that are lower than those in Germany and from the eastern European nation’s adoption of the euro. The plant produces the Touareg and Audi-brand Q7 sport-utility vehicles and the Skoda Octavia sedan. It also makes bodies for the Porsche Cayenne SUV.

Volkswagen wants to add a new small car at Bratislava, creating 760 jobs by 2012, according to an Economy Ministry document discussed by the Cabinet today. Work on the expansion would start early next year and take three years to complete.

Source: Bloomberg