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European Commission endorses €32 million aid to Kia Motors Slovakia

The European Commission has authorized under EU state aid for regional development rules ad hoc aid of €32 million ($44 million) that the Slovak government plans to grant to Kia Motors Slovakia for the expansion of its Žilina car plant. 

The aid consists of a direct cash grant for an eligible investment cost of €216 million ($298 million). Kia Motors Slovakia s.r.o., established in 2004, is a wholly owned subsidiary of the Kia Motors Corporation of Korea. The investment concerns the expansion of an existing facility for car production, for which state aid was approved by the Slovak State Aid Office before the accession of Slovakia to the EU. The new investment aims at an increase of the annual production capacity from 200,000 to 300,000 vehicles a year by 2010, as well as the production of a new model.

The project aims to create 663 new jobs by the end of 2008. The project is expected to attract numerous additional investors in the car sector and therefore support the creation of new employment and economic development in the region. As a general rule, the Commission does not favor the award of ad hoc regional aid. However, in the Kia case it was satisfied that the positive contribution of the overall investment project to regional development far outweighed the potential distortive effects of the aid.

Kia has started production of its Ceed Sporty Wagon variant at its new Zilina plant a month ahead of schedule. More than 1,000 wagons were to be manufactured this week, with the very first example, finished in black, destined for an Italian customer and the majority of this initial batch being distributed to the Kia dealer network in Europe's top five markets - Germany, Spain, the UK, France and Italy.

During the H1 of 2007, Zilina manufactured over 63,000 Ceed five-door hatchbacks - achieving record daily record output in April with 830 units completed in a single day, and a monthly record in May when 14,000 cars were dispatched. Kia's Slovakia manufacturing facility, which also produces diesel engines, is the company's first assembly plant in Europe and an investment of €1 billion ($1.38 billion). Currently, the plant directly employs 2,400 people working a two shifts. (,