UPDATE 1-Czech VW unit Skoda plans EUR 2 bln expansion

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By Jan Lopatka

PRAGUE, Sept 27 (Reuters) - Czech car maker Skoda Auto, a unit of Germany's Volkswagen AG , will invest 2 billion euros ($2.83 billion) into an expansion in the Czech Republic over the next five years, a company source said on Thursday.

Skoda, the biggest Czech firm with sales of 7.1 billion euros last year and the country's biggest exporter, announced earlier on Thursday a plan to make a new model in one of its Czech plants and expand production at another.

"Investment into the Czech Republic over 5 years will be approximately 2 billion euros," the company official said on condition he would not be named.

The source said the company would hire about 1,500 workers for its Vrchlabi plant, several hundred workers for its Kvasiny plant and two hundred people to development at its headquarters in Mlada Boleslav, north of Prague.

Skoda said it would start making the Yeti small SUV in Kvasiny.

Assembly of Skoda's successful mid-range Octavia model will begin at VW's plant in the Slovak capital Bratislava in addition to the main factory in Mlada Boleslav.

Skoda raised its 2010 output target earlier this month to 1 million cars from 800,000, up from 556,347 last year and 616,000 expected for this year.

The company has also been expanding in India, China and other emerging markets, where it sees most of its growth coming from.

Skoda's makeover under Volkswagen from a loss-making, communist-era factory into the biggest success story of the economic transformation process lured dozens of other car and parts makers into the country, making it an important part of the European automobile production chain.

Toyota and Peugeot have opened a new plant near Prague and Hyundai is building another in the east of the country.