Central/Eastern Europe: Automakers Drive Automation Investment

Manufacturers needing a strategy for expanding production or distribution into Europe who might have looked in France, Germany, or Italy are finding success in Warsaw, Prague, or Trnava. Poland, Czech Republic, Slovakia, and other central and eastern European countries are the new markets of Europe, and they are also becoming the countries of choice for opening new manufacturing facilities or outsourcing production.

Production costs are still cheap compared to Western Europe, and the countries contain domestic markets of 100 million residents eager for Western standard products. Automakers are leading the way in the region, and automation suppliers are close by to make sure those new factories keep running.

According to a recent article in the International Herald Tribune1, “After the collapse of Communism in 1989, many foreign carmakers rushed to acquire local carmakers or build their own factories in countries like Slovakia, Poland, Hungary, Romania, and the Czech Republic. That relative trickle, though, is now a flood. The money has been pouring in, and the pace and frenzy is prompting talk of Europe’s auto industry shifting from west to east.”

The International Herald Tribune reports that “by 2010, the Czech Republic could nearly double its production over last year, to more than a million cars. Indeed, as a whole, Eastern Europe has become Europe’s backyard manufacturing center, and it could be producing 3.4 million cars annually by 2010, a 33% jump over 2005, according to forecasts by PricewaterhouseCoopers. Even Russia’s production is expected to rise to 1.6 million cars a year from 1.2 million now.” This is creating many more manufacturing jobs.

Investment attractions

The reasons for growth in the region include many facts attractive to foreign investment. Central Europe is in the European Union now, and economies there are stable. East European governments are providing incentives ranging from investment financing to low, flat taxes on employee wages and corporate profits. In Slovakia, for example, all taxes are a simple 19%, reports the International Herald Tribune.

Another attractive fact: low-cost labor. Although wages are rising, the article quotes Alain Baldeyrou, Peugeot’s plant manager in Trnava, who says engineers in Slovakia earn half of what Western engineers make, and assembly line workers one-third to one-fifth.

And the automakers are pulling their suppliers into the region as well. “Peugeot officials said that steel coils for the Trnava plant now come from mills in France, Germany, and Austria. But they plan to begin using Slovak steel next year after U.S. Steel brings online a $160 million hot-dip galvanizing mill able to make 385,000 tons of automobile-grade steel sheet a year in Kosice, in eastern Slovakia. Seats for the Trnava, Slovakia, plant are manufactured at a suppliers’ park near the main factory. Slovakia, the Czech Republic, and Poland have been vying to attract suppliers for the big new assembly plant Hyundai is building at Novosice in the eastern corner of the Czech Republic,” says the International Herald Tribune.

Automation sector growth

A Frost & Sullivan report on automation spending in Central and Eastern Europe, which includes Poland, the Czech Republic, and Hungary but excludes Russia, shows continued growth in the region. The rate of growth has slowed, but trends are positive for the next few years.

Frost & Sullivan says the market for automation is expected to mirror the growth in the automotive market, which it estimates at between 5% and 6% through 2009. That rate of growth also outperforms the average GDP growth for the region. Bolstering the demand for automation equipment is growth of more than 8% predicted for the power generation industry, almost 7% for the chemical industry, and more than 9% for the food and beverage industry by 2009.

The total automation market for the region is estimated to be worth US$1.9 billion in 2009, up from US$1.5 billion in 2005.

1 Tagliabue, John, “There’s Detroit and There’s Trnava,” Nov. 25, 2006, International Herald Tribune, www.iht.com .

Author Information

Michael J. Majchrzak is publisher of Control Engineering magazines for Poland, Czech Republic/Hungary and Russia. These collections of local news and product information, technical tutorials, and application case histories are published in local languages 10 times per year by Trade Media International in Warsaw, Poland.

New high-tech repair center to open in Czech Republic

Solectron Corp., a global provider of manufacturing and aftermarket services based in Milpitas, California, announced plans to open a new high-tech repair center in spring 2007 in Plzen, in the Czech Republic. “We ran an in-depth study concerning the options of expanding our business. As part of that study, we evaluated several Central European countries.… We selected the Czech Republic for its long-term affordability, a solid infrastructure, its rich talent base and good access to our customers throughout Europe,” says Craig London, executive vice president for Solectron Global Services.

According to Jana Pexova, chief of the regional CzechInvest Agency office in Plzen, the center will employ “many highly-skilled personnel. The company will need about 50 graduates in its repair center and even more people in the support services.”

A company press release says Solectron plans to invest more than€3.5 million in Plzen. The plant will offer repair services for Solectron’s customers, covering most stages in the repair cycle of high-tech electronics, which includes warranty management, parts management, repair and return, asset recovery and remarketing.

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