Car manufacturers yesterday displayed optimism for the future despite faltering global vehicle sales.
BMW is planning to spend €1bn (£615m) and create 10,000 jobs with a plant in eastern Germany, while Honda began production at a new £130m facility at Swindon.
BMW will start producing its 3-Series by 2005 using 650 workers in Leipzig, which beat off competition from cities in western Germany, as well as Arras in France and Kolin in the Czech Republic.
The Munich-based group said it needed the facility to help with a new product and marketing offensive and because "of the continued positive development in sales of BMW automobiles".
The decision was hailed as "an excellent choice" by Germany's chancellor, Gerhard Schröder, while critics said the car maker had bent to political pressure to help dent eastern Germany's 17% unemployment rate.
BMW insisted the decision was made on purely economic grounds noting that federal and state governments would stump up as much as 35% of the cost.
Chief executive Joachim Milberg said: "It is part of European Union rules that east Germany is entitled to subsidies and we expect to receive them."
He claimed the availability of qualified staff, local suppliers and infrastructure offset advantages from lower wages at a site abroad.
Industry experts said the domestic location might also be a reflection of the company's lack of confidence following its costly exit from Britain after the Rover purchase and sale.
Meanwhile, Honda was boasting there was no public money going into its Swindon plant, the first new car factory in Britain since Toyota opened near Derby eight years ago.
The Honda site will increase annual production by 100,000 vehicles to 250,000 by 2002. The Japanese car group will export the new three-door Civic model from Wiltshire to the US and its own domestic market in the Far East.
Up to 200 new workers are being sought for the expanded Swindon facilities bringing the total employed there to 4,000.
Honda has run up signifi cant losses in Europe with damage being caused by the strength of the euro and pricing weakness in Britain.
Minoru Harada, president of Honda Europe, said sales of the four-door Civic were up by 25% in Europe over the past few months and there were high hopes of a "significant boost" from the new three-door next year.
British industry minister Brian Wilson said that the new plant was "a vote of confi dence in British craftsmanship", while the good news around Britain's car industry was added to by Land Rover celebrating record sales in Britain in the first six months of the year.
The Ford subsidiary said sales were up 15% on the same period of 2000, while the parent group reported an operating loss of $551m (£400m).
