Volkswagen is to spend EUR785m (US$1bn) at its plant in northern Spain over the next five years, the third carmaker to boost investment in the country in recent months.
The Spanish government said spending by Ford, Renault and now VW are the result of a labour market reform that makes the country more competitive for business and also makes it cheaper for companies to hire and fire employees.
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Renault is to hire 1,300 new people at its Spanish plants while Ford is shifting production from Belgium to Valencia.
VW said a large part of the funding will go on tooling for manufacturing the next generation Polo. Its plant outside Pamplona in the Navarra region has a production capacity of 1,400 cars a day and employs 4,600 people.
On the other side of the coin, however, Nissan said last week it was cancelling plans to expand production of a new model in Spain after it failed to reach an agreement with union workers over new contract terms.
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