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VW supply park races clock

LOZORNO: From this western Slovak village, auto-maker Volkswagen Slovakia's new industrial park appears as a cloud of dust on the shimmering August horizon.
But up close, VW's future Lozorno supplier base is a maelstrom of digging, grading machines. Already, less than four weeks since the bulldozers arrived, massive frames for future production halls have been erected, sewage pipes laid and a 25-hectare swath of forest reduced to bare ground.
The day-and-night construction marathon is trying to compensate for a series of delays in the project to create a hassle-free site for suppliers feeding VW's nearby Devínska Nová Ves car plant and the company's new Colorado off-road vehicle, which will be produced exclusively in Slovakia.


An industrial park to house 15 firms supplying auto maker VW has leaped ahead in first four weeks.
photo: TASR

LOZORNO: From this western Slovak village, auto-maker Volkswagen Slovakia's new industrial park appears as a cloud of dust on the shimmering August horizon.

But up close, VW's future Lozorno supplier base is a maelstrom of digging, grading machines. Already, less than four weeks since the bulldozers arrived, massive frames for future production halls have been erected, sewage pipes laid and a 25-hectare swath of forest reduced to bare ground.

The day-and-night construction marathon is trying to compensate for a series of delays in the project to create a hassle-free site for suppliers feeding VW's nearby Devínska Nová Ves car plant and the company's new Colorado off-road vehicle, which will be produced exclusively in Slovakia. VW's production makes up 16% of the country's annual exports; its 15 suppliers who will be filling the Lozorno park must, under contract, be in their new halls by the beginning of next year.

When Colorado production begins in 2002, VW expects the number of cars it currently turns out every year at its Slovak operations to jump from 127,000 to 280,000 pieces.

In view of the importance of the park, the government became directly involved in the Lozorno project in March 2001 after VW, which began its search for land in 1999, proved unable to forge a deal with the many owners of the Lozorno property.

Calling the VW investment one of "strategic importance" to the Slovak economy, the government used a clause in its State Assistance Law to donate land owned by the Defence Ministry to VW, as well as to cover the costs for building the necessary infrastructure. The deal cost taxpayers 333 million Slovak crowns ($7 million), while VW promised to invest 70 million German marks ($33 million) into the park's production facilities.

According to Karl Peter Wilhelm, a member of the board at VW Slovakia, the support the firm received from the government was common around the world.

"If Slovakia wants to be a part of the world and attract some investors here, it has to have it too [state help for investors]," Wilhelm said. "We need this kind of support to get our suppliers here, because it's not a park for us but for our suppliers. We are forcing them to make investments by building this park, and thus helping the nation to lower its high unemployment rate." The park is expected to provide 1,256 jobs.

"It would have been unrealistic to put this project in place without the government's involvement and positive approach," said Milan Novotný, head of Auto Martin firm which is building the Lozorno complex.

VW suppliers who will be located in the park include car interior producers Johnson Controls, Lear Corporation and Sommer Liberty, and electronics maker Delphi. Two French VW suppliers, Plastic Omnium and Inergie, have already settled in their own complex five kilometres from the Lozorno park.

For state officials, the Lozorno project is particularly important because it represents more than another foreign direct investment (FDI) injection - it signals the increased maturity of Slovak manufacturing and labour skills.

"Lozorno is about expanding production capacities, and especially increasing exports with higher added-value, because components [for the Colorado] will be not just assembled but also made here," said Martin Kapko, head of the foreign investment department at the Economy Ministry. "It's about attracting VW's international suppliers to Slovakia, and is visible evidence of VW's faith in Slovakia and its potential."

Domestic media have recently criticised the government for the advantages it has given foreign investors, including VW and the SkyEurope air carrier, with headlines such as "the government pays, VW buys cheap" and "the company will have many advantages but no responsibilities".

But Kapko said such public discussion of special conditions for foreign investors was a natural and desirable process. "One has to realise that this [incentives programme] is something the foreign investment market in central Europe forces us to do," he said. "The stimuli that investors are offered are often the only factor in investor decisions on whether or not to settle here."

Slovakia last year won $2 billion in foreign investment, matching the country's entire intake between 1993 and 1999. The government has taken steps to top that figure this year, approving a 10-year tax holiday for investors and an Industrial Parks Law allowing public money to be used in buying land and building facilities for industrial parks.

According to Lozorno Mayor Ľubomír Haramia, VW's industrial park was even more worthy of support than other foreign investment projects because of its significance for the country's economy, as well as VW's ability to constantly increase its production in Slovakia. "Production is expected to rise, and to have a growing impact on the national economy," Haramia said.

While back in 1991, the company's first year in Slovakia, VW planned to turn out between 30,000 and 50,000 cars annually, the firm invested almost one billion German marks in Slovakia over the next decade to triple forecasts. VW exports stood at 11.3 billion crowns for the first half of 2001, or about 3.7% of total Slovak exports.

Domestic business people, who have criticised the government in the past for giving more privileges to foreign than to Slovak companies, agreed that in VW's case the state was right to put itself out. "If Slovakia had 10 firms like Volkswagens, thousands of people wouldn't have to ask for work at labour offices. This country has to create the best possible conditions for such foreign investors," said Vladimír Soták, director of the largest domestic metallurgy firm, Železiarne Podbrezová.

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