VW extends Chinese partner commitments

VOLKSWAGEN and Chinese joint-venture partner First Automotive Works (FAW) have extended their agreement until 2041, building on the past 20 successful years of cooperation.

Further cementing Volkswagen’s position in the world’s largest car market and second largest economy, its joint venture with Shanghai Automotive Industry Corporation (SAIC) has been strengthened by an agreement to invest in a new proving ground.

The agreements were signed on Friday in Berlin in the presence of German Chancellor Angela Merkel, Chinese Premier Li Keqiang and Volkswagen Group chairman Martin Winterkorn.

As that was happening, the ink was still drying on a joint memorandum of cooperation forged in Wolfsburg the previous day, committing VW and the Chinese education ministry to work together on developing vocational training.

First cab off the rank within the renewed FAW-Volkswagen partnership will be a significant expansion in research and development, ahead of upcoming moves into “new business areas” including alternative drivetrain technology.

Meanwhile the Shanghai Volkswagen joint venture will now invest €100 million ($A145.7m) in a proving ground for testing new models.

The new testing facility will be located close to the Urumqi factory commissioned last August, which is situated in the Xinjiang region of north-western China and about 3000km west of the capital Beijing.

Volkswagen will also cooperate with the Chinese government to deliver vocational training and the German firm will encourage China to expand its training system.

Two of the planned nine “centres of competence” have already been set up, delivering teacher training and teaching programs linking theory and practice in line with Western vocational training principles.

The various educational facilities will specialise in automotive, tooling, automation and bodyshell technologies.

Volkswagen Group board member for human resources Horst Neumann said the vocational training system the company has set up across the world “closely links theory and practice and ensures that young employees acquire a high standard of specialist skills”.

“That is why we want to encourage even more higher vocational education institutions in China to commit to vocational training,” he said.

Between FAW-Volkswagen and Shanghai Volkswagen there are eight vehicle production facilities and a further nine making components for the Volkswagen, Audi and Skoda passenger car brands.

FAW-Volkswagen already plans to construct two more factories, one in Qingdao, about 600km south-east of Beijing, and the other in Tianjin, about 130km south-east of the capital.

In the first three quarters of 2014, Volkswagen Group’s Chinese joint venture-operations delivered more than 2.7 million vehicles, up 15.2 per cent year-on-year in a market forecast to deliver 8.3 growth by the end of December.

During the agreement signing ceremony, Professor Winterkorn said VW and its partners are “focussing on innovation, eco-friendly technologies and excellently trained employees in China”.

“Today's agreements pave the way for the sustainable development of China's automotive industry and for the Volkswagen Group and its joint ventures to benefit from growth,” he said.

“We are firmly convinced the extended cooperation with FAW we signed today reinforces our excellent strategic position going forward. We will be introducing our newest testing methods in China at our new proving ground, and will be paying very close attention to the appropriate training for our employees. This is clear testimony of Volkswagen's commitment to the Chinese market.”

Volkswagen Group board member for China Jochem Heizmann said the company is “firmly convinced” the agreements reinforce Volkswagen’s “excellent strategic position”.

“We will be introducing our newest testing methods in China at our new proving ground, and will be paying very close attention to the appropriate training for our employees,” he said. “This is clear testimony of Volkswagen's commitment to the Chinese market.”

Volkswagen’s 2014 sales target in China exceeds 3.5 million vehicles, which would account for roughly a third of its global sales.