Brains over brawn
Known mostly as a place to get labor-intensive jobs done cheap, the East wants to prove it can handle more r&d work
That will have far-reaching consequences for the industry, they agree.
“All smart companies look at the potential here for r&d,” said Ladislav Glogar, head of Visteon’s operations in the Czech Republic and Slovakia. “Those that aren’t already utilizing the region for engineers and research and development are thinking about it.”
Visteon entered central Europe in 1993, seven years before it was spun off by parent Ford. It was attracted to the region by the manufacturing and design abilities of Autopal, a Czech supplier of headlamps based in Novy Jicin, Glogar said.
“They had r&d and they built on it,” he said. “Other companies that came later are looking to see what they can do.”
Job retention fears
Adding engineering value to what otherwise is a commodity product is essential to keeping jobs from moving further east in search of lower costs, Glogar says. Industry wages in the Czech Republic are about E7 an hour. In the Ukraine, they average E1.50 a hour.
Delphi and other suppliers already are shifting production of such labor-intensive parts as wiring harnesses to the Ukraine
Vratislav Kulhanek, head of Bosch’s Czech operations in the 1990s, recalls that many European manufacturers didn’t believe in the locals’ potential for r&d when they initially set up shop in the East. On-site engineering usually was limited to low-tech compliance tasks. Development work was done in the West.
“I went through a lot of problems to establish a development branch. They allowed me 12 people,” recalls Kulhanek, who now is head of the Skoda supervisory board. “Now they have a new building and more than 200 people.”
Marek Adamiak, head of Delphi Poland, says there are three stages to developing an r&d capability.
1. Have a few engineers at the production site to ensure that processes are integrated correctly.
2. Hire more engineers and train them to adjust products to meet customer specifications.
3. Open a dedicated stand-alone technology center.
Delphi arrived at the third stage in 2000, he points out. Its tech center in Krakow, Poland, which opened then, now employs more than 500 engineers and researchers. An additional 264 engineering positions are being created with the aid of a government grant. The new staff will work on suspension systems.
The r&d overlay has helped Delphi develop a richer product mix for the region.
Renault and Nissan CEO Carlos Ghosn believes that the East’s continued development as an automotive power should not be considered a threat to car and component plants in western Europe.
“Eastern Europe is not in competition with western Europe, eastern Europe complements western Europe,” Ghosn said. “This is an opportunity to make the European territory much more competitive in the future.”