VW Sets $3-Billion Deal With East Germans

From Reuters

Volkswagen AG of West Germany unveiled on Monday the biggest joint venture to date of a Western firm with East Germans: a $3-billion agreement to build Volkswagens at sites where East Germany's Trabant autos are produced.

One result of the $3-billion deal will be to consign the boxy little Trabant sedan, which became a symbol for East Germany's political upheaval last year, to history by 1993. Thousands of the sputtering cars with two-stroke engines brought refugees and visitors into West Germany when the border opened in November.

Chairman Carl Hahn of Volkswagen AG, Europe's leading mass car maker, said at the Leipzig Trade Fair on Monday that a joint-venture firm in East Germany would start assembling 50 VW Polo models a day, beginning in September, with output set to reach 250,000 cars a year by 1994.

VW signed a commitment to the joint venture in December, soon after revolution in Eastern Europe's rigid barriers to the West began breaking down.

The project, with a factory at Karl-Marx-Stadt, is by far the most ambitious yet announced by any Western firm in East Germany.

Dieter Vogt, general director of VW's East German partner VEB IFA-Kombinat, said his company's Trabant, nicknamed the "Trabi," would not be phased out immediately.

"We will carry on producing as long as demand lasts, up to the new car coming in at the end of 1993," he said.

The deal with VW will give East Germans a new car, with production of the bigger Golf model also under consideration. But it might also cause large-scale unemployment at IFA's antiquated plants in Zwickau and Karl-Marx-Stadt.

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