Facing tighter margins and continuous needs to be closer to market, automobile manufacturers in Europe continue to seek out low-cost locations while maintaining a stronghold in traditional markets. The industry continues to stretch to the outer limits.
Nearly unthinkable a few decades back, Ford Motor Co. is now investing $50 million in upgrades to its plant in Vsevolozhsk, Russia, near St. Petersburg where it will begin assembling its new Focus model in May. The reason: The demand for modern cars in Russia. With more money in their hands, new cars are now within the reach of a burgeoning middle class.
Ford was among the first original equipment manufacturers (OEMs) to open a plant in Russia. Its success there is prompting other automakers, such as Toyota, Nissan and Volkswagen, to consider the market.
“Ford will produce 30,000 Focus cars in Russia, up from 16,000 last year, and import another 10,000 cars,” said Sergei Bogdanov, marketing and sales head for Ford. “This will represent a 13 percent share of the market for foreign cars in Russia, imported or produced domestically.”
The goal is to capture 10 percent of the Russian car market by 2010.
DaimlerChrysler is seeking to establish an assembly plant in Russia and is now examining various sites, including one near St Petersburg where it had already purchased land. The facility would assemble completely knocked-down parts (CKD) shipped from outside of Russia.
Poland, the Czech Republic and Hungary are successfully attracting automobile manufacturing as well. General Motors, for example, has invested more than $650 million in Opel Polska, Poland. The company operates the largest foreign investment in the Katowice Special Economic Zone where it employs more than 2,200 people. On average, GM exports 82 percent of its production.
“The flexibility, productivity and quality levels demonstrated at the Opel Polska plant are an excellent basis for the increased capacity utilization going forward,” said Michael J. Burns, president of GM Europe.
More than 70 suppliers have located to Poland to supply GM.
Audi is expanding its operations in Hungary. Audi has been operating in a duty-free area near Gyor since 1992. The plant employs about 5,000 people and produces almost the entire range of Audi engines.
The Association of the Hungarian Vehicle Component Manufacturers, a group founded in 1993 to promote the best interests of the industry, supports automobile manufacturing in Hungary.
Even Romania is attracting its share of the industry thanks to a highly skilled, low-cost work force. Early this year, Michigan-based TRW Automotive Holdings Corp. will expand to a 41,000 square foot facility located in Timisoara to double its factory’s size. Phase I of the project represents a $16 million investment.
An added advantage to locate in non-EU countries like Romania and Russia is assemblers do not have the burden of adhering to EU rules and regulations.
Traditional Bastions
Germany remains a key location where a well-entrenched and sophisticated network of suppliers, manufacturers and centers for R&D reside. Ongoing research at Aachen University’s Institute of Automotive Technology in Aachen studies drive lines, bodywork and chassis. The city is also known for the manufacturing of tires and safety glass for the automobile industry.
“Aachen has an optimum strategic position thanks to its proximity to the European Ford headquarters in Cologne, the test track in Lommel, Belgium, the ease with which partners in Brussels and Paris can be reached, and the numerous airports,” said Rudolf Kunze, chief technical officer for the Ford Research Centre in Aachen. “The region offers a wealth of automotive competence, in terms of both industry and teaching. Our biggest capital lies in the quality and qualification of our employees.”
Ford is entrenched in Cologne, where in 2003 it invested more than $470 million for the production of Ford Fiesta cars. In 2005, the company will produce the V12 Aston Martin Motors at the site.
Typical of what is taking place throughout Germany today, AFL Stribel has consolidated its locations with much of its R&D now taking place in Stuttgart. The company, which is part of Alcoa and headquartered in Brentwood, Tenn., designs and manufactures electronic controls and relays for automobiles. The company maintains a production center in Hungary, with its biggest plants in Romania.
“More than 60 percent of our labor is manual,” said Ulrich Salomon, managing director of AFL Stribel.
Last January, the company began production for the new Audi A-6 being produced in Mor, Hungary. Salomon reveals this work may be moved to Romania.
Bavaria, a German state synonymous with BMW, is developing into a top location for power electronics. Nuremberg offers the Center of Excellence for Automotive Power Electronics, which aims to use innovative power electronics to develop new solutions for automotive drive systems.
“Nuremberg can rely on the sectors of power electronics and automotive engineering,” said Otto Wiesheu, economics minister of Bavaria. “It is right to use the economic and scientific excellence available in the region for developing new and promising automotive drive systems.”
The center is being set up to the south of Nuremberg and is an agency of the Fraunhofer Institute of Integrated Systems and Device Technology.
Great Britain is well known for its automotive business. The presence of major tier-one companies in Wales makes the automotive sector that nation’s largest industry.
Car engines for Ford are manufactured in Bridgend. Toyota is expanding operations at its Deeside engine facility. Robert Bosch Gmbh recently opened a 500,000 square foot plant near Cardiff, its biggest plant outside of Germany.
Professor Garel Rhys, Cardiff Business School’s automotive industry director and chairman of the Welsh Automotive Forum, said that Wales plays the biggest role in the motor industry of any part of the UK, despite not having a car assembly plant.
“It even employs more people than some regions with assembly plants,” Rhys said.
“Wales has been very successful with the components industry and spread the risks associated with car production.”
In the Netherlands, OEMs and subcontracting companies recently joined forces with Dutch universities and institutions to create the Automotive Technology Center, an initiative to stimulate the growth of automotive technology in the Netherlands.
Luxembourg’s highly developed transportation and communications networks make it an advantageous site for automotive suppliers since all European automakers and many U.S.-based manufacturers maintain major facilities within a 250-mile radius of Luxembourg City.
Goodyear, DuPont, Delphi Automotive Systems, Guardian Industries and Husky Injection Molding Systems benefit from locating in Luxembourg. GM maintains a major R&D facility in Luxembourg;
Recently, Guardian decided to build the world’s largest coater of glass products in Bascarage. The state-of-the-art facility, completed late last year, encompasses 269,000 square feet on 21 acres adjacent to Guardian’s first EU float glass plant.
The plant will supply flat glass to the new sputter coater. Guardian will make three products at the plant: Sun-Guard, its reflective and non-reflective coated commercial products; Low-E coated glass for residences; and Infrared reflective coated glass, which is used by European automakers.
R&D in the field of intelligent vehicle safety systems (IVSS) is ongoing in Sweden. An $80 million program to study IVSS is open to international companies and partners. The program, which has already attracted leading Swedish and international companies and universities, will run through 2008.
In addition, the program is expected to generate access to distinct competence that will be highly valuable for research and education, as well as design and testing.
European Developments
In Spain, Volkswagen AG will start manufacturing 100 percent of its Seat Ibiza model in Martorell, Catalonia. The announcement followed successful wage talks between Seat’s management and Spanish labor unions.
For the past two years, 10 percent of Ibiza models were manufactured by the company’s Volkswagen Slovakia unit.
Nissan plans to manufacture a new truck for Europe in Avila. Production is expected to begin in 2006 with an annual production target of 24,000 units. Opel is investing 400 million euros in Zaragoza for its new generation Corsa.
“Zaragoza is the jewel in the group’s crown and we plan to continue investing in this factory, which has to continue with its improvements,” said Frederick Henderson, GM chairman of GM Europe. “It is a plant with high quality production, but it has to continue to improve on costs and productivity.”
While superb design comes more to mind than automobile manufacturing, Italy offers its share of activity in Europe’s automotive sector.
“Emila land of motors” is the slogan that sums up Bologna, Italy’s Emilia-Romagna specialization in the production of luxury automobiles and sports cars, spare parts, accessories and high-tech mechanical and electronic components for some of the largest international manufacturers.
Nearly 600 firms belong to the regional motor industry district, which employs up to 36,000 workers and generates a turnover of about $10 billion.
Bologna is especially known as one of the leading Italian and European centers for the motorbike and motorcycle industry, thanks to the presence of companies and brands such as Ducati, Lamborghini, Malaguti, Minarelli, Delphi-Diavia, Bredamenarinibus, Magneti Marelli and Morini.
In Switzerland, new solutions are being studied for electric vehicles. The most important transport-related project has been the six-year, large-scale fleet test of lightweight electric vehicles in Mendrisio in the Italian-speaking Swiss canton of Ticino.
The project is to run until 2005 and promotes all kinds of energy-efficient vehicles throughout the canton.
Without a doubt, costs associated with manufacturing and labor, are major concerns in this highly competitive industry. Innovation also plays an important role. Given the cornucopia of options available to automotive manufacturers in Europe, the industry will continuously move throughout the entire continent.
.
Means the article is accessible only to our magazine subscribers.
