The European Commission has started a probe into the legality of plans by Portugal to give a EUR3.5m training grant to Volkswagen's Auto Europa car plant.

But it cleared another Portuguese grant worth EUR3.4m for Webasto, which makes retractable hardtops for Auto Europa, Dow Jones reported.

Portugal said the grant will help train Auto Europa workers to integrate the plant's production methods into those used by the Volkswagen group, and to launch the new convertible Eos model.

After an initial look at the plan, Europe's competition watchdog "doubts that the aid will lead to the company carrying out additional training activities, in which case the aid would not be necessary and would constitute prohibited operating aid", the news agency said.

The opening of the investigation allows interested parties to comment on the proposed measures. It doesn't prejudge the outcome of the procedure, Dow Jones noted.

Regulators judged the Webasto grant legal because "the grant in this case will encourage training beyond Webasto's immediate needs."

"Aid should lead to additional training. That seems to be the case for Webasto but may not be so for Auto Europa. We therefore must check that the aid to Auto Europa would genuinely be used for additional training activities," added EU competition commissioner Neelie Kroes in a statement.

Dow Jones noted that, in December 2005, Portugal announced its intention to grant EUR3.5m to Auto Europa and EUR3.4m to Webasto, for training programmes costing EUR10.8 and EUR6.8m, respectively.

Auto Europa was established in 1991, as a joint venture between Volkswagen and Ford, Dow Jones said. In 1999 Volkswagen acquired the whole of the company's capital. It has a single production plant in Setubal south of Lisbon where it currently employs 2,790 people and also produces several minivan models including the jointly developed VW Sharan and Seat Alhambra. The Ford Galaxy variant was built until this year.

However, Ford has now launched a new in-house designed and built Galaxy while the VW and Seat twins will be made until 2008, according to just-auto's Production Life Data Base (PLDB). Auto Europa was recently awarded the contract to build the Eos coupe-cabriolet, just launched in Europe and due on sale in the US in June, at the rate of 45,000 a year.

Dow Jones said Webasto Portugal was established in January 2003. Its headquarters and sole production plant is located in the municipality of Palmela, in the district of Setubal.

Webasto's capital is shared between Webasto AG, of Germany, and Webasto France SAS. It is initially focusing on the supply of retractable hardtops for the new Eos model produced by Auto Europa. The plant has 273 newly recruited workers, who require intensive training.