Volkswagen has reportedly decided that uncertainties over the level of the Czech currency mean that it won’t now manufacture its Up! small car in the Czech Republic.

The Czech currency has shown volatility in the current financial crisis and VW is now concerned that a volatile koruna poses profitability risks on such a low-margin car.

The Hospodarske Noviny newspaper reported that VW was previously planning a possible start of production of the small car in the Czech Republic in 2010. The Czech Republic was earmarked as a supply base for European markets.

The report adds that due to lower production levels in its Western European plants amid the global economic slowdown, the VW may utilise that unused capacity for Up! production.

The project would have provided jobs for up to 3,000 Czechs, the report said.