Nissan will invest 130 million euros ($178 million) in the Barcelona factory to create capacity to build 80,000 units of the car a year, with production starting in 2014, the company said in a statement on Monday. The investment will create 1,000 direct jobs and 3,000 indirect jobs.
The car will rival models such as the Volkswagen Golf and Ford Focus and marks the automaker's return to the European mainstream compact segment that the company quit when it stopped selling the Almera in the region in 2006.
The model will be the first car to be produced in the Barcelona factory, which builds the Pathfinder SUV, Navara pickup and NV200 commercial van.
Nissan said it is also investing 14 million euros in Barcelona to create 24,000 units of additional annual capacity for the pickup and 6 million euros to produce transmissions for the Leaf electric car and eNV200 electric van.
Nissan is returning to the European compact segment to help the company achieve its aim of supplanting Toyota as the region's No, 1 Asian brand by unit sales. The compact would bring more fleet customers to the brand. The automaker's current compact model, the Qashqai, is a hit with private buyers.
The automaker has not released any information about the new compact but company executives say it will not be called the Almera.
Nissan originally planned to build the compact at its factory in Sunderland, England, but the automaker now plans to produce a premium compact for Infiniti at the plant instead, starting in 2015.
Renault's management has told unions that Nissan's plan to build the car in Barcelona does not end hopes that the Japanese automaker may allocate some production to Renault's French factories if a new wage deal is agreed, according to a report in Les Echos.
Renault, VW invest in Spain
Nissan's investment in Barcelona is the latest sign of returning confidence in Spain's competitiveness. Last month, Renault said it would build its new Captur subcompact SUV/crossover at its Valladolid factory. The Clio-based Captur will debut at the Geneva auto show in March. Volkswagen also said last month that it will invest 785 million euros in its Pamplona plant over the next five years, mostly for the next-generation Polo subcompact.
The Spanish government has said recent investment by automakers was a sign that labor market reform, which gave firms more power to hire and fire workers and greater wage-negotiation flexibility, has made doing business in Spain more attractive.
Nissan exports 80 percent of the cars made in Barcelona. This shields it from a lagging Spanish market, where car sales have plummeted as a result of high unemployment, low consumer confidence and economic uncertainty.
"In coming years, the Barcelona plant will work at full capacity, with annual production of over 200,000 units. Taking into account the current crisis, this is not just an achievement for Nissan but for industry in Spain," said Frank Torres, head of Nissan Spain.
The Barcelona investment comes after Nissan reached a deal with unions last week on wage cuts, ending months of tense negotiations that nearly caused the company to cancel expansion plans in Spain.