October 9, 2015 / 7:09 AM / 3 years ago

Volkswagen guarantees 4.2 billion euro Spanish investment

A Volkswagen logo is seen on one of the German automaker's cars in a street in Sydney, Australia, October 8, 2015. REUTERS/David Gray

MADRID (Reuters) - German carmaker Volkswagen (VOWG_p.DE), grappling with a scandal over rigged emissions tests, has guaranteed a 4.2-billion euro ($4.8 billion) investment in Spain, Industry Minister Jose Manuel Soria said on Friday.

“Yesterday I had a meeting in Germany with the chairman and he guaranteed the investments planned for Spain would be maintained,” Soria told La COPE national radio.

VW, which has admitted to cheating in U.S. diesel emission tests, pledged the multi-billion euro investment over five years for the SEAT brand factory in Martorell outside Barcelona — Spain’s biggest car plant — and the VW brand factory in Navarra.

VW is an important employer in Spain, representing around 22,000 jobs. Spanish assembly plants are winning new models and creating jobs in a country with one of the highest unemployment rates amongst developed countries.

Unemployment will be a major theme in general elections on Dec. 20 where the ruling centre-right People’s Party is fighting for re-election in a closely-run contest with the opposition Socialists and newcomer parties.

Spain has no domestically-owned car makers — Volkswagen bought SEAT from the state in 1986 — but the overall industry accounts for almost 10 percent of economic output and employs around 9 percent of the workforce.

VW said on Tuesday it would need to make massive cost savings to overcome the consequences of the emissions scandal.

Billions of euros have been wiped off the German group’s value following the revelation that it used software to change its diesel engines’ performance under U.S test conditions.

Reporting by Jose Elias Rodriguez and Elisabeth O'Leary; Writing by Sonya Dowsett; Editing by Mark Potter

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