29 Nov 2005
By Jesse Snyder, Automotive News Europe
Auto production is booming in central and eastern Europe. Massive new plants are opening in the Czech Republic and Slovakia. Others are either under construction (Slovakia) or planned (Czech Republic).
Still more factories are expanding capacity and adding shifts in places such as Poland, Romania, Hungary, Slovakia, the Czech Republic, Slovenia and the Ukraine.
In western Europe, assembly plants are laying off production workers and reducing capacity. Automakers are assigning the next generations of some cars now built in the West to eastern European plants.
In 2005 in the UK, both the Jaguar Coventry and MG Rover Longbridge plants closed.
Between 1999 and the end of 2003, western European automakers reduced net employment by 59,175 or 5.6 percent of their combined 1.12 million worker, according to ACEA, the European automakers association. Since then, automakers have laid off or announced plans to cut another 42,000 jobs in western Europe.
A developing cluster
Planned, new and expanded assembly plants in the Czech Republic, Slovakia, Hungary and Poland "have created a central European cluster" of 13 to 15 plants, said Nigel Griffiths, director of automotive research for consultancy Global Insight in London.
"But only one plant has opened, so we haven't seen the real impact of that so far," he said. "It will have a major impact because the vast majority of the new capacity is for western European markets."
Virtually all of the changes in European manufacturing so far this decade have been reductions in western Europe and increases in central Europe, according to the PricewaterhouseCoopers Automotive Institute (formerly called Autofacts). The company said between 2001 and 2009, eight western European plants have or are projected to close, eliminating 1.4 million units of annual capacity.
In the same period, eight of the nine plants opening -- totaling 1.6 million units -- are in central Europe or the eastern portion of Germany.
Moving to central European markets is both a short-term cost-cutting move and a mid-term marketing strategy to meet growing demand there, said Christopher Benko, global director of the PwC Automotive Institute.
This spring, the Toyota Peugeot Citroen Automobile joint venture in Kolin, Czech Republic, opened. It builds a trio of small cars: the Toyota Aygo, Peugeot 107 and Citroen C1. The plant expects to reach full production of 300,000 units a year by next spring.
Two other large plants are due to open next year in Slovakia: the PSA/Peugeot-Citroen factory in Trnava and Kia's plant in Zilina.
Booming Slovakia
Combined with Volkswagen's growing production complex in Bratislava, the Kia and PSA plants could push tiny Slovakia's annual capacity to 900,000 by 2009. Kia's parent Hyundai is in the final phase of selecting a site for a 300,000-unit Czech assembly plant.
Other automakers plan to expand existing capacity in the region. Suzuki is adding capacity in Esztergom, Hungary, for a new SUV it will build for itself and for Fiat and Lancia. Fiat will need new capacity at its plant in Tychy, Poland, by 2008 to build a minicar for itself and Ford.
Toyota is greatly expanding manufacturing in Europe. Besides its share of the new Czech plant, Toyota has added capacity in the UK and Turkey and plans to open a plant in St. Petersburg, Russia, by 2007.
Korean automaker Hyundai and affiliate Kia are becoming a force in the East. Each plans a central European plant. Kia has started kit production of older models at the Izh-Avto plant in central Russia. And we expect Hyundai will expand in Turkey," analyst Griffiths said.
Whether the move eastward will continue is unclear, Griffiths said.
"Phase one was moving light commercial vehicles to Turkey. Phase two was moving minicars to the East -- and making the next Ford Ka in Fiat's Poland plant is the last stage of that," he said. "The question is whether there is a phase three. Will we have stability or is there more?
Closings and openings, 2001-2009
Source: PwC Automotive Institute
From Automotive News (A Crain publication)
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