ABU DHABI, 7 September 2004 — Abu Dhabi and German car giant Volkswagen have reached agreement in principle to set up a joint company to invest in the auto industry in the Gulf emirate, a senior official said yesterday.
“Agreement in principle has been reached on setting up a holding company for investment in the manufacture of cars and components in Abu Dhabi,” said the head of the emirate’s economy department, Sheikh Hamed ibn Zayed Al-Nahayan, after a meeting with visiting VW executives.
The company would partner the German carmaker and two local firms, and would be announced once formalities have been completed, the official WAM news agency quoted him as saying.
Investments in five car projects beginning early next year would reach two billion dirhams ($545 million) in a first phase and five billion dirhams ($1.36 billion) in a second phase, Sheikh Hamed said.
The new company would finance part of these projects, to be implemented in a specialized industrial zone, while Volkswagen would bring in “strategic partners” to put up the rest of the funds, he said.
He did not give details about the projects except to say they would “rely primarily on energy and raw materials available” in the oil-rich Gulf region.
VW CEO Bernd Pischetsrieder said in June his company might move some parts production to Abu Dhabi.
He told the Financial Times VW was investigating whether aluminum, rubber and plastic polymer components could be manufactured in the Gulf state, where energy costs are lower than in Germany.
VW had earlier said it expected Abu Dhabi to take a stake of up to 10 percent in its share capital by the beginning of October.
The deal is believed to be in connection with a transaction whereby the auto giant would team up with two other investors to acquire LeasePlan, a unit of Dutch bank ABN Amro, for two billion euros ($2.4 billion).
Under the terms of the deal, the German group would acquire a 50-percent stake in LeasePlan, a car leasing company with a fleet of around 1.2 million cars.