Volkswagen to invest EUR3.4 billion in Brazil for model, plant upgrades

Article by Anita Panait, on October 24, 2012

German carmaker Volkswagen will be investing up to EUR3.4 billion ($4.4 billion) to upgrade its model lineup and plants in Brazil. According to VW chief executive officer Martin Winterkorn, the investment is part of the carmaker’s goal to become the biggest auto maker in the world by 2018, noting that Brazil is a cornerstone of the Strategy 2018.

The German carmaker’s investment plan in Brazil runs through 2016 and includes an investment of EUR126 million at its component factory in Sao Carlos in a bid to increase output to 4,800 engines a day from the current 3,800 units. VW is hoping that its strategy in Brazil could help it offset the dwindling demand for vehicles in Europe.

However, VW is not without rivals in Brazil as the other carmakers from Asia and the United States are also making their moves in the South American country. According to IHS Automotive, vehicle sales in Brazil are expected to jump by 8.6 percent this year.

Michael Macht, VW’s production chief, said that the German carmaker’s investment in Brazil will involve standardizing factories and installing technology to produce vehicles based on its MQB platform, the same architecture that underpins the VW Golf and other models. Macht remarked that he sees enormous potential in Brazil just from the systemic implementation of parts sharing.

Headquartered in Sao Bernardo do Campo, Brazil, Volkswagen do Brasil Ltda., is a subsidiary arm of Volkswagen Group in the country. Established in 1953 and led by Friedrich Schultz-Wenk as it first president, Volkswagen do Brasil was in responsible for the local assembly of the Volkswagen Type 1 from parts imported from Germany.

Volkswagen do Brasil had its first plant in Ipiranga, Sao Paulo, Brazil, although this was strictly a knock-down kit operation. Here, Volkswagen do Brasil had assembled the 2268 Fuscas and 552 Kombis by hand.

Volkswagen do Brasil decided to build a proper plant in Brazil after the Brazilian government banned the import of completely built vehicles into the country in 1953. Volkswagen do Brasil opened a proper facility in Sao Bernardo do Campo, which operations started in mid-1957. The Sao Bernardo do Campo site initially produced only the VW Kombi from September 1957. In January 1959, Volkswagen do Brasil added the production of the 1200-cc Fusca in the plant. In 1959, Volkswagen do Brasil commenced production at its new factory near Sao Paulo.

Volkswagen do Brasil was accused by its workers of spying starting in the 1970s, during the country’s military dictatorship in 1964 to 1985. In 1976, there were mass arrests and some workers at Volkswagen do Brasil were tortured. Because of this, local workers at Volkswagen do Brasil traveled to its headquarters Wolfsburg in 1959 to personally inform the CEO.

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Topics: vw, brazil, investment

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