LONDON (Reuters) - The European Bank for Reconstruction and Development has put the brakes on 250 million euros of funding it had approved to help build a new Volkswagen factory in Poland, according to two sources at the development bank.
The project was agreed by the EBRD’s board around the middle of the year, but the two officials who spoke to Reuters said the deal had been put on hold in the wake of the carmaker’s emissions test cheating scandal.
“It has been frozen,” one of the sources who spoke on the condition of anonymity said. “At the very least it (loan) is going to have to be repriced, but it could get pulled altogether,” he said.
The upheaval at VW, the unknown scale of a cost-cutting plan and the rise in the carmarker’s own borrowing costs all contributed to EBRD’s decision to freeze the Poland factory funding, he said.
A VW spokesman in Germany said the plant, which will cost a total of 1.1 billion euros ($1.20 billion), had already started being built and would be completed.
The factory, in Września, to the west of central Poland, is set to produce up to 100,000 of the firm’s new “Crafter” vans a year and employ around 3,000 staff.
The uncertainty of the EBRD’s portion on the funding is the latest headache for VW as it deals with the fallout from the September emissions testing scandal.
Its chief executive resigned when revelations broke and since the start of this year, the VW group’s executive board has brought in a total of six new members and the firm has changed senior management at seven of its 12 car brands.
Additional reporting by Andreas Cremer in Frankfurt. Editing by Jane Merriman