Audi to build A1 model

Volkswagen, Europe's largest carmaker, will produce a small new Audi at its plant in Brussels from 2009, meaning far fewer job losses there than previously announced, the German company recently announced.

The Belgian factory will exclusively manufacture more than 100 000 A1 cars per year from 2009 to 2016, securing up to 3000 jobs, although not all directly with Volkswagen.

Volkswagen announced plans last week to stop making its best-selling Golf at the Brussels plant and slash the workforce to 1500 from about 5000.

The plans prompted workers in Brussels to go on strike.

"Last week I was not very optimistic... but there is now a prospect on the horizon," Belgian Prime Minister Guy Verhofstadt told a news conference after meeting VW Chairman Ferdinand Piech and Audi chief and future VW chief executive Martin Winterkorn.

The Prime Minister said the government had not offered state aid for the plant, but that VW might benefit from new incentives for manufacturers such as lower taxes.

He added that Volkswagen's top management would return to Brussels in January to finalise a deal with unions, which will have to agree to boost productivity. Observers say this could mean a freeze in pay and longer hours.

Union officials said on Friday that staff would probably vote next week whether to resume work.

"The workers will decide in the coming days. It is too early now," said Manuel de Castro, an official from the FGTB union.

Unions said they still expect 20&nsp;000 people to march through the Belgian capital on Saturday, echoing protests in 1997 when French carmaker Renault decided to close a plant near Brussels, axing some 3100 jobs.

The Brussels factory has been producing 194 000 Golfs and 10 000 Polos a year. VW workers had feared the plant would not survive if it made only the Polo.

Uncertainty remains over the two years between the end of the Golf production and start of the Audi project.

Winterkorn said in a statement he was confident solutions would be found, including the possibility of a slightly early start for the Audi project.

Manufacturing jobs are scarce in Brussels, where unemployment is running at over 20%.

Volkswagen is one of the largest private sector employers in the city, with many other jobs at stake in supply companies.

"Volkswagen will be a springboard to make our economy more competitive," Verhofstadt said.