Volkswagen cancels plans for new plant in Turkey

Volkswagen sales slumped as a result of the corona crisis. A rapid recovery is obviously not expected. Plans for a new plant were scrapped.

The VW group stops the plans for the construction of a new plant in Turkey. “The background is the slump in global automotive demand caused by the corona crisis,” the company said in Wolfsburg on Wednesday. The project for the factory in Manisa near Izmir was actually as good as decided, but had recently been put on hold.

In the summer, VW CEO Herbert Diess conducted negotiations with the Turkish head of state Recep Tayyip Erdogan. Works council chief Bernd Osterloh also reportedly met with Turkish trade unionists in July 2019 and then gave the green light.

Now it says: “From today’s perspective, it is therefore not necessary to build up additional capacities,” as the VW Group explained. Turkey confirmed VW’s cancellation for the plant.

The back and forth when deciding on a new VW plant in Turkey had more than just economic reasons. After the first reports of a possible new factory near the city of Izmir in western Turkey, Volkswagen was criticized for indirectly supporting the Turkish President Erdogan with the billion dollar investment. According to the Turkish Chamber of Commerce Abroad, a total of around 7,000 German companies are active in Turkey, including medium-sized companies and Dax groups such as Siemens, Deutsche Bank or Allianz.

Then the Turkish military marched into Syria for the third time in October 2019. Critics did not see Turkey as justified, the United States imposed sanctions for a short time, European governments could not agree on common punitive measures. In Germany, people demonstrated against the mission, including PKK supporters and opponents of the war.

First, VW said that the decision planned for the new plant in mid-October would be postponed, “even if the investment continues to make sense from a business perspective.” Lower Saxony’s Prime Minister Stephan Weil (SPD), who is a shareholder in the supervisory board of VW for the country, said in October that he could not make such a decision as long as the Turkish fighting continues.

Passat goes to Bratislava

Then the works council reported. “As long as Turkey tries to achieve its political goals with war and violence,” the employee representative on the Group Supervisory Board will not agree, said Osterloh, the chairman of the works council. He told the Braunschweiger newspaper that because of its history during the Nazi era, Volkswagen had a special responsibility as an industrial group: “Volkswagen can and must be moral.”

For Turkey it was always a prestige project, for Volkswagen the future of the production of the bestseller Passat. If the investment fails, it was said for months, on the one hand Volkswagen would have to rethink. “We expect Volkswagen to make decisions politically, not economically,” said Turkish Industry and Technology Minister Mustafa Varank in an interview with Handelsblatt newspaper in the autumn.

Volkswagen Passat Alltrack

Instead of the intended factory in Manisa near Izmir in western Anatolia, VW wanted to build the Passat mid-range car and the identical Skoda Superb in the Slovakian factory in Bratislava. VW wants to provide additional investments of half a billion euros for this. VW did not comment on this.

According to earlier information, the previous production locations of these models in Emden and Kvasiny are to be given new models – Emden will be switched to electric cars, and the Czech Skoda plant will build SUVs in the future.

Originally, the group wanted to build a multi-brand plant in Manisa for around one billion euros with an annual capacity of 300,000 vehicles and around 4,000 employees. Construction should begin at the end of 2020 and production would then have been scheduled for 2022.

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