ANE grades the Easts major players
VW, Suzuki and Dacia score high on our 10-year report card; Fiat and Ford have room for improvement
Reason: The carmaking group really would have problems without its extremely successful operations in central and eastern Europe.
VW has raised Skoda production to more than 450,000 cars a year from about 125,000 in 1991, when it took its first stake in the Czech company. VW also successfully repositioned Skoda across Europe as a brand that offers premium VW quality at value prices. But VW’s position in central Europe is much more than Skoda. The German automaker has invested more than E1.5 billion in Slovakia, where its Bratislava factory has become the group’s SUV production hub. In addition to the Polo station wagon, the plant makes the VW Touareg, Porsche Cayenne and Audi Q7 SUVs. In Poland, VW produces the VW Caddy light commercial vehicle and makes engines for the entire group. Sister brand Audi makes the TT roadster and most of its engines in Gyor, Hungary.
Reason: Suzuki is maximizing the use of its plant and is tapping a motivated nearby work force.
The Japanese automaker, in which GM has a 20 percent stake, is quietly ramping up production to 300,000 units a year by 2007 at its factory in Esztergom, Hungary. Suzuki is shifting production of the Ignis and Wagon R+ north to GM’s factory in Gliwice, Poland, and expanding Esztergom to start production of an SUV for Fiat and a crossover for itself. The EU’s open borders give Suzuki access to the job-seeking, Hungarian-speaking workers just across the border in Slovakia.
Reason: GM has selectively picked its partners; is starting to use eastern Europe as a staging area into both EU and Russian markets.
GM declined to step into the FSO plant in Warsaw, Poland, in the early 1990s in favor of building a new plant in Gliwice. In acquiring the core production assets of Korea’s Daewoo Motors in 2002, GM also ignored the Korean company’s operations
in Poland and the Ukraine in favor of Gliwice. GM said it will raise output at the plant to about 180,000 units this year from about 125,000 in 2005 by adding the Opel Zafira to the existing Astra and Agila lines. GM also assembles Opel and GM Daewoo models with Ukrainian automaker ZAZ for the Russian and Ukrainian markets.
Reason: Renault’s Dacia brand is starting to shake up the region’s status quo by copying some of Skoda’s pricing and placement strategies.
Former Renault CEO Louis Schweitzer missed out on Skoda, but acquired Romania’s Dacia in 1999 and overhauled it to begin producing an inexpensive world car. That car, the Logan, has captivated buyers across Europe with its low price and triggered a rush by rival automakers to come up with an antidote. Renault said that last year it sold 134,887 Logans, with Romania, France and Turkey being the top three markets. Meanwhile, Renault said it expects Dacia’s total production to rise to about 220,000 units this year from 172,000 in 2005 and 94,000 in 2004. As this special edition went to press, Renault also was considering a bid for Daewoo’s plant in Romania. A takeover of that plant would provide about 200,000 units of new capacity for Renault, which has talked openly of boosting global Logan sales to 1 million a year by 2010.
Reason: PSA plans to use its two central European plants interchangeably, giving it more flexibility to respond to Europewide changes in market demand. One possible problem will be keeping wages at its Slovakia plant competitive with the VW plant in nearby Bratislava.
The French automaker has bet big on Slovakia as a way to average-down its groupwide production costs. Under plans now in action, central Europe will account for roughly one-quarter of the group’s total European production beginning next year. PSA recently disclosed that it will increase capacity at its greenfield plant in Trvana – which is scheduled to come on line this year – to 450,000 units a year from the earlier planned 300,000 units. PSA likely will add a minivan to the small-segment cars already slated for production there. Meanwhile, PSA’s joint venture with Toyota in Kolin, Czech Republic, will make a combined 200,000 Peugeot and Citroen minicars a year. The joint venture has merged PSA’s purchasing power in Europe with the Toyota manufacturing system.
Reason: Operations in Poland and the Czech Republic are just ramping up; grade likely to rise in coming years.
Toyota is moving slowly and surely into central Europe. The Japanese automaker took its first big step with the startup last year of its joint venture with PSA/Peugeot-Citroen in the Czech Republic. At full capacity, the factory will produce 300,000 cars a year for the Toyota, Peugeot and Citroen brands. With key Toyota suppliers such as Denso beginning to set up shop nearby, it is unclear whether Toyota will build another plant in central Europe or focus on the one it plans to open in late 2007 in St. Petersburg, Russia. Toyota also has set up engine and drivetrain manufacturing factories in southern Poland.
Reason: The Koreans are nearly ready to make cars in central Europe, but the infrastructure they were promised might not be ready. Great potential to boost grade if planned plants are a success.
The Koreans are making the northwest corner of Slovakia and the northeastern region of the Czech Republic into their manufacturing center for the European market. Led by the planned startup of Kia’s factory in Zilina, Slovakia, in late 2006, the Koreans will add another factory, likely near the Czech city of Ostrava, to build Hyundai-brand vehicles. The factories will have a combined annual capacity of 600,000 units.
Reason: Lost its early status as a leader in the region, but is bouncing back.
Italy’s flagship automaker led the charge east back in the 1960s through licensing and joint-venture production agreements with Russia’s AvtoVAZ and Poland’s FSO, but Fiat has failed to maintain its momentum. Although Fiat remains Poland’s best-known car brand, it has fallen to third place in sales there amid stiff competition from used cars and a market newcomer, the Dacia Logan. But Fiat is moving aggressively to build up the region as a production base. In 2008, Fiat will begin producing 240,000 minicars a year at its plant in Tychy, Poland. Fiat and Ford of Europe will split production of the cars, which will share a shortened version of the Fiat Panda’s architecture. Fiat also will begin sourcing a small SUV from Suzuki’s plant in Hungary. Meanwhile, it has signed a deal with Russia’s Severstal to begin assembling the Palio small car and Albea lower-medium model in Russia starting in 2007.
Ford : C-
Reason: Almost entirely missed the move east, but is now riding Fiat’s coattails into Poland.
The company has largely missed the move east. It passed on opportunities to take over Daewoo’s production assets in Korea and central Europe, and seems ready to pass on Daewoo’s Romanian plant as well. The modern plant, which has capacity to build 200,000 units a year, produces several models under license to General Motors. Distracted by severe problems at home in the US, Ford seems to prefer partnerships in the region to expensive new production ventures. Its Ka minicar replacement, for example, will be built under contract by Fiat in Tychy, Poland. In addition, Ford’s Volvo operations source a large number of parts from Poland.