VW Plans Van Factory in Poland in Global Expansion

Volkswagen AG (VOW), Europe’s largest automaker, will invest about $1.11 billion in a new factory in Poland to assemble the Crafter van in an effort to make its commercial-vehicle operations more global.

The new factory in Wrzesnia, about 270 kilometers (170 miles) west of Warsaw, will start production in the second half of 2016 and employ about 2,300 people, the Wolfsburg, Germany-based carmaker said today in a statement. Spending on the plant will total 3.37 billion zloty by 2018, Slawomir Majman, head of Poland’s Information and Foreign Investments Agency, said on his Twitter account. VW declined to comment on financial details.

“With the decision to produce the Crafter in Poland, we have laid the foundations for the strategic reorientation of our light commercial vehicles,” Leif Oestling, VW’s board member in charge of truck and van operations, said in the statement. “The Crafter is outstandingly well-suited for all the growth markets of the world.”

VW is seeking to gain full control of heavy-truck manufacturers Scania AB (SCVB) and MAN SE and encouraging cooperation between them and the van business to expand while holding back costs. The investment in Crafter production is also part of a broader effort by European automakers to reposition their van operations ahead of a potential recovery after a recession sapped demand.

Recovery Potential

“There’s a close connection between the overall economic development and van demand,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “Commercial-vehicle sales will rise with the economy,” as Europe recovers from the effects of the sovereign-debt crisis.

The European Commission is forecasting that the economy of the euro area will expand 1.2 percent in 2014, marking a revival from a recession that ended in the first quarter of last year. Industrywide van sales in Europe were essentially unchanged in 2013 at 1.44 million vehicles, 35 percent below the 2007 level.

Daimler AG (DAI) is letting the van cooperation with VW that currently produces the Crafter lapse at the end of 2016 to use capacity for the next version of the Mercedes-Benz Sprinter. That follows the 2012 introduction of the new Mercedes Citan small van, which is based on Renault SA (RNO)’s Kangoo model.

Porsche Panamera

Fiat SpA (F) and PSA Peugeot Citroen (UG) agreed last year to invest more than 700 million euros ($974 million) over five years to develop new versions of the full-sized Fiat Ducato, Peugeot Boxer and Citroen Jumper models. Peugeot is investing more than 750 million euros on its own on a mid-sized delivery van after agreeing to end a separate partnership with Fiat.

The VW Crafter is currently built on the same production lines as the Mercedes Sprinter under a 2005 contract. Plants in Ludwigsfelde near Berlin and Dusseldorf, Germany, have combined annual production of about 150,000 delivery vehicles. VW’s other vans include the mid-sized T5, built in Hanover, and the small Caddy, produced in Poznan, Poland.

VW’s new production line is set to benefit from cheaper wages. Labor costs in the Polish auto industry are 7.48 euros per hour, less than one sixth the rate in Germany, according to data from German auto association VDA.

The new factory, the first in Europe since Mercedes opened a plant in Hungary in 2012, could add to overcapacity. The region’s auto-assembly sites are forecast to produce at 76.3 percent of their potential, according to IHS Automotive.

In addition to the new Polish site, VW is making production shifts in Germany. The Porsche Panamera four-door coupe will be entirely produced in Leipzig from the fourth quarter of 2016, freeing capacity to produce the VW Tiguan compact sport-utility vehicle in Hanover.

To contact the reporter on this story: Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net Chris Reiter

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