VW in Seat talks: Piech seeks cash aid from Spanish government

THE HORSE trading over the future of Seat began in ernest yesterday when the Volkswagen chairman, Ferdinand Piech, met Spanish government leaders.

VW has hinted that Seat's oldest plant on the Zona Franca industrial estate in Barcelona, employing 10,500 people, may have to be closed, a move that would affect 20,000 further jobs indirectly.

The Germans, who say they cannot pump any more money into their ailing Spanish subsidiary, were said to be seeking financial and other support from both the Madrid government and the Catalonian regional authorities.

Spain's oldest car manufacturer, sold by the state holding company Instituto Nacional de Industria to VW in 1986, faces losses this year of Ptas100bn (around pounds 500m).

Mr Piech was followed by a delegation including VW's Spanish-born production chief, Jose Ignacio Lopez de Arriortua, who met Spain's deputy prime minister, Narcis Serra. But there was little sign that the government wanted to reverse its privatisation policies by renewing public involvement in the car firm.

Madrid government ministers firmly blame VW for the crisis. A government statement after the meeting called for fresh financial support for Seat but appeared to suggest it was up to VW to put fresh money in. It called for a solution that would 'strengthen the company's capacity, retain the marque and give it total autonomy in the purchase of components', more of which should be Spanish-made.

That appeared to be a pointed reference to the fact that Seat's 1993 loss was largely a result of being forced to buy components from VW with the peseta devalued three times in the past year.

The statement suggested further meetings between VW and the Spanish industry minister, Juan Manuel Eguiagaray, who was quoted yesterday as saying public reinvestment in Seat 'does not form part of government policy at the moment'.