Carmaker Volkswagen of South Africa (VWSA) yesterday unveiled plans for a new R750-million state-of-the-art paint shop that will be constructed at its Uitenhage plant, in the Eastern Cape.

The investment will form part of an aggressive three-year R2-billion capital expenditure programme by VWSA, and demonstrates the German brand's confidence in its South African operation, as well as the future of the country's motor industry, VWSA managing director Andreas Tostmann said.

Speaking at a press conference in Johannesburg yesterday, Tostmann said the construction of the facility would start next month, with completion and full operation scheduled for the first half of 2007.

Over the past five years, the group has invested more than R2-billion in plant machinery and facilities to enable the growth of both its domestic and export business.

He pointed out that the new paint shop would enable the company to continue to remain a world-class supplier of vehicles to both domestic and world markets.

VWSA plans to export more than 40 000 vehicles in 2005, achieving year-on-year growth of approximately 45%, while its component exports will grow to approximately R2,7-billion in 2005 - growth of 8%.

"The new facility will give us substantially improved flexibility. This means that we will be able to paint and, thereby, manufacture a greater variety of car shapes and sizes - ranging from the ultra small car segment up to the B or medium class segment. This flexibility gives us confidence going into the future to accommodate changes in a very dynamic industry," Tostmann commented.

The new facility will use water-based paint materials, thereby, reducing the use of solvents, and enabling VWSA to improve the treatment of wastewater. As a result, the company will install three new water treatment plants within its manufacturing operation.

The investment of R750-million covers a period of some 15 years or three product lifecycles, and the group is confident that it will be well equipped to accommodate ever-decreasing product lifecycle time frames.

"In addition, the 15-year investment will take VWSA eight years past the 2012 Motor Industry Development Plan (MIDP) timeframe. It is critical that we plan our business past the 2012 MIDP extended period," he added.

Tostmann explained that the industry's global competitiveness would be severely tested with a protection of 25% and 20% ad valorem in 2012 for vehicles and components, respectively.

"We will need to reduce the cost gap against world-class bench marks. The new facility will ensure that we can accommodate the production growth potential facing us over the next 15 years."

The group estimates that domestically-produced vehicles for both export and local consumption will exceed 800 000 units in 2010 - growth of over 70% on 2004. Specifically, the new paint shop will increase VWSA's daily unit output to in excess of 500 units, from a current 450.

Technically, the new paint shop will offer the most advanced application systems, materials, environment control and energy recovery systems to be found anywhere in the world.

The new project will necessitate employees to substantially improve their skills and level of expertise. Training will, therefore, take place both locally and internationally.

Tostmann also stressed that no job losses are foreseen with the switch to the new paint shop, despite the new facility's substantial robotised technology. Some 150 to 200 workers are expected to be redeployed.

The new paint shop will be built adjacent to the current facility, which will be fully operational until early 2007 when production will swing mainly to the new state-of-the-art operation.

Tostmann estimated that more than a third of the R750-million investment in the new facility would be sourced locally.

"The balance of the investment will be awarded to an international equipment manufacturer to be appointed shortly," he said.