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Gear Box Welfare "Germany pays VW"

Tuesday November 18, 3:54 pm Eastern Time

EU clears aid to Volkswagen , ends row

BRUSSELS, Nov 18 (Reuters) - The European Commission on Tuesday cleared 98
million marks ($57 million) in
German subsidies to help Volkswagen develop a new gearbox and
simultaneously ended a bitter dispute with
Germany over illegal aid paid to the carmaker.

It said the new aid for VW's plant in Baunatal, in the western state of
Hesse, would ensure the survival of 5,600 jobs
 in a region hit hard by the restructuring of the automobile and arms

The Commission's green light came only after the German government ensured
the repayment of some 90 million
marks in excess subsidies paid to VW by the state of Saxony in 1996.

``The German authorities have certified that the amount illegally paid had
been reimbursed by VW,'' the Commission
 said in a statement, formally closing a long-standing row with Germany.

The Commission authorised Saxony in June 1996 to grant 540 million marks to
 the car maker for investing at its plants
in Chemnitz and Mosel, but disallowed another 240.7 million marks.

In an unprecedented challenge to the Commission's authority, Saxony gave VW
 a total of about 631 million marks.

Volkswagen's investment in Hesse is estimated at 596 million marks. Its
local plant employs a total 14,800 people,
of which 6,000 in the manufacturing of automatic gear boxes.

The new gear-box system is expected to help reduce petrol consumption.

$1 equals 1.724