Seat's acting chairman, Peter Walzer, said in a news conference that personnel levels must be slashed by 9,000 from an overall work force of 23,500.
Mr Walzer said Seat's 40-year-old Zona Franca factory in Barcelona, which employs 13,600 people, would stop manufacturing cars. He said production would be switched in 1994 to the new Martorell plant north of the city.
Seat is expected to lose an estimated 100bn pesetas (pounds 524m) this year, a sharp increase from the 13bn pesetas (pounds 68m) lost in 1992.
Overall sales of Spanish cars fell nearly 17 per cent in the year to 30 September, slightly higher than the overall Western European decline, according to manufacturers' figures.
The Zona Franca plant will be converted into an industrial park for component suppliers.
The layoff announcement hits Spain hard. The country already has to deal with unemployment topping 22 per cent - the highest in the European Community.
Of the 9,000 to be laid off, 1,400 are temporary employees whose contracts will not be renewed and 3,000 are older than 55 and will be offered early retirement, Mr Walzer said.
Seat is looking for possible jobs for the remaining 4,600 workers elsewhere in the company and with firms planning to set up shop in the Zona Franca industrial park.Reuse content