Niche car production in Europe is set to double - and that will rapidly boost business for contract assemblers over the next few years, according to a report commissioned by Valmet Automotive.
The Finnish production specialist says it is seeking a major tie-up with an outside engineering company to help it take on bigger automotive assembly and developmental contracts.
Valmet's base in Uusikaupunki has grown to its current status as one of the biggest assembly plants for convertibles in Europe, making the Porsche Boxster and Saab 9-3 cabriolet and Viggen.
However, Steyr in Austria has won a key contract to design and build two Saab derivatives - believed to be the next-generation 9-3 convertible and coupe - from 2003. The deal has called into question Valmet's future with Saab.
If Saab 9-3 convertible and coupe production moves to Austria, Valmet would be left making just 12,000 Porsche Boxsters a year. Production of the Lada Samara ended in 1998 due to falling demand.
But Valmet says it is talking to other manufacturers. Rumors that Subaru may sign a deal with Valmet began circulating late last year. Although nothing has been confirmed, the deal would make sense if Subaru wanted to take advantage of its European rallying success in rally-mad Finland.
The Valmet report predicts that the European niche-car market will double over the next few years from 1.2 million to 2.5 million cars.
As niche-car demand grows, carmakers will increasingly outsource assembly to reduce costs, increase flexibility and improve profitability, said the report.
Veli-Pekka Vasama, Valmet's executive vice president in charge of business development and marketing, said the study's findings reinforced his company's future strategy.
'Our business plans are exactly in line with the findings of the report,' Vasama said. 'We have demonstrated many times our ability to bring a new product to market quickly.
'Cooperation with a leading outside engineering company will enable us to take over responsibility for demanding outsourced projects.'
Valmet made 34,000 cars last year. It employs 1,500 people across a range of departments, including body shop, paint shop, final assembly and a product design and development center.
Last year Valmet spent A9 million setting up a new assembly line to allow multiproduct manufacturing with an output of 125 cars per shift.
'The new assembly line continues the steady upgrading of Valmet Automotive's capabilities as a manufacturer of demanding niche products,' said Juhani Suvinen, executive vice president in charge of production.
'Thanks to new developments and technologies, the new assembly line takes up about half of the floor space of the previous line. We now have space within the plant for another production line for new products.'
Further investment in the paint shop will be made through 2000 and 2001 to allow the manufacturing of large vehicles such as sport-utilities and minivans.