Tuesday, May 30, 2006

Contracts for Volkswagen Plant in Kaluga, Russia Signed

Text from Volkswagen AG.
Pischetsrieder: Significantly strengthening position in Russia

Wolfsburg/Moscow, 29 May 2006 - The way for a new Volkswagen AG production plant in Russia is clear. The Chairman of the Board of Management of Volkswagen AG, Dr. Bernd Pischetsrieder, and the Chairman of the Board of Directors of Skoda Auto, Detlef Wittig, signed the necessary contracts with the Russian Federation and the Kaluga Oblast in Moscow on Monday. The new plant will be built in the city of Kaluga some 160 kilometers to the south west of Moscow. Representing the Russian partners, the contracts were signed by Minister German Gref on behalf of the Russian government and Governor Anatoly Artamonov on behalf of the city of Kaluga. “We will be significantly expanding our position in Russia over the coming years with this new plant. It represents an important strategic step for our Group, and also contributes to securing jobs in Germany,” commented Pischetsrieder.

"We are firmly resolved to tap the considerable growth opportunities offered by the Russian market,” said Pischetsrieder. He added that, due to high customs duties on imported automobiles, Volkswagen and Skoda models could only be offered at competitive prices if they were produced in Russia. “The new plant means lower customs duties and more attractive prices for our cars. That is how we can significantly increase our market volumes in Russia and thus raise capacity utilization at the Group’s component plants.” Pischetsrieder stated that the objective was to expand Group sales from some 30,000 vehicles at present to 150,000 units over the next four to five years.

During the run-in phase, semi knocked-down Volkswagen and Skoda brand models will be assembled in Kaluga from the second half of 2007. The Skoda Octavia will be the first model to leave the assembly line. Initially, some 20,000 units will thus be produced annually. At the same time, full production facilities comprising body shop, paint shop and assembly lines will be installed, with operation scheduled to commence in the first half of 2009.

The Volkswagen brand will develop a vehicle especially for the Russian market. On the basis of present plans, this vehicle will sell for less than 10,000 euros. The notchback limousine will be based on the Polo platform. The Skoda brand will build the Octavia.

The new plant will employ up to 3,500 people. Numerous production parts will be delivered by suppliers in Russia, thus generating a significant share of the automotive added value in Russia. Gearboxes and engines will be supplied by other Group plants.

At its meeting on April 20, 2006, the Supervisory Board of Volkswagen AG approved the Board of Management’s plans for a significant expansion of the Group’s commitment in Russia.

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