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Wednesday, 18 July, 2001, 16:37 GMT 17:37 UK
BMW to build new German plant
Pollution in Leipzig
Unemployment in Leipzig is running at 17%
Luxury car maker BMW is to build a new plant in the eastern German city of Leipzig at a cost of 1bn euros (613m; $859m)

The plant, which will create 10,000 jobs, signals the firm's commitment to Germany, after mixed fortunes in international ventures.

Leipzig beat off competition from Schwerin and Augsburg in Germany, Arras in France and Kolin in the Czech Republic.

The new plant will have a daily capacity of 650 cars, said BMW. Just more than half the jobs will be created at the site, and the rest at suppliers.

BMW will start producing its 3-Series at the plant in 2005.

East is best

Chief executive Joachim Milberg said factors including the site's economic efficiency and flexibility and the availability of qualified staff, suppliers and infrastructure offset Germany's high labour costs.

BMW's head office in Munich
BMW: Happy at home
Unemployment in eastern Germany stands at just under 17%, more than twice as high as in the western part of the country.

Some investors had favoured a site in the Czech Republic, arguing the cost base would be more efficient due to lower wages.

There was also speculation that mighty engineering union IG Metall had exerted pressure on BMW to build the plant in Germany.

Mr Milberg said he expected to obtain a subsidy from the federal government and the states of Saxony and Saxony Anhalt worth 28-35% of the investment.

The subsidies would need European Union approval.

BMW has regained investor confidence since it disposed of its loss-making British Rover unit last year - a bitter experience that may have contributed to its decision to stay at home.

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