VW Slovakia is preparing for a more than 10 per cent production increase in 2002 after flat output in 2001.
VW is Slovakia's largest industrial concern and a cornerstone of export income. The company plans to increase its overall output this year to over 200,000 vehicles after production stagnated in 2001.
VW produced nearly 182,000 vehicles last year, about 800 more than in 2000 but still beating projections it had made at the beginning of the year. In addition, 331,000 transmissions and 16.7 million components were built.
In the second half of the year, production began on a new version of the Polo, Volkswagen's popular small hatchback, which forced some production line changes.
Although the factory re-fit caused lower production forecasts, Jozef Uhrík, a member of Volkwagens's board of directors, said that a major part of maintaining production growth was the ability to transfer part of the components manufacturing operation to Volkswagen's central Slovak operation in Martin.
According to Uhrík, current production is over 500 vehicles per day, and this figure is set to double in the near future.
"Today we're only half-way there. When we finish expanding our production facilities and those of our suppliers, we will have conditions for 100 per cent growth compared to today," he said.
VW is seeking to expand its current operations in the Žilina region, where the Martin facility is located. Uhrík said: "We want to rent a factory in central Slovakia. If it is well prepared, it can mean the creation of work for 400 to 500 people."
While Volkswagen has yet to release details, government officials have expressed confidence that the deal will go ahead. Dušan Laššák, director of the Žilina regional labour office said: "I've been involved in negotiations, and for now, it has been decided that it will be definite."
The planned expansion in central Slovakia is good news for the Žilina region, which recorded a year-end unemployment rate of 17.67 per cent and where around 5,000 people have recently lost their jobs to mass layoffs. Volkswagen is already one of the largest foreign investors operating in the region and presently employs around 700 people there. VW employs 7,500 people across Slovakia.
A major part of VW's work during its 10-year history in Slovakia has been creating a network of producers and subcontractors. "Through the Automobile Industry Association (ZAP) it has been possible to create in Slovakia a strong group of suppliers, today already over 45," said Uhrík.
He added: "The importance of the network is that the next big projects will be organised east of our borders. Our suppliers will be prepared. Components will not have to be transported to the Ukraine and to Russia from Spain or Germany, but will go from here in Slovakia."
While many of VW's subcontractors are located in western Slovakia, the planned expansion in the central region will complement current activities there, centred on Auto Martin. Uhrík said: "We have managed to create a foundation for investors in a very short time.
"Auto Martin was created in preparation for VW in Martin. Projects which Auto Martin shares in will help create 4,800 to 5,000 jobs, and indirectly another 6,000. The volume of investment in these projects is reaching Sk15 billion."
Another massive VW investment, the Lozorno industrial park, is due to be completed in March 2002, which will further expand VW's capacity. The first four tenants, all VW suppliers, have already moved in and set up shop as the park gears itself for the summer release of the new Colorado sport-utility model.
Ján Pribuľa, the government's plenipotentiary for the auto industry, said of the construction progress at Lozorno: "With the kind of investment VW has made in Slovakia and with the supplier base it has built, the company has created the basis for a long-term business in Slovakia. VW's suppliers are also expected to use Slovak companies, which in turn will help domestic small and medium-sized businesses grow."
Analysts stress the importance of the Lozorno facility in reducing Slovakia's trade deficit, which in 2001 grew to a record Sk103.2 billion. VW, by far the country's largest exporter, saw its output drop by 20 per cent in the second half of 2001 as they changed over production lines for the new Polo design and the Colorado.
The auto industry in general is key to Slovakia's economic prospects. The company saw gross receipts top Sk88 billion last year, a Sk3.8 increase from the previous year. VW sells more than 90 per cent of its wares outside of Slovakia and last year produced Sk6.8 billion in foreign sales, over 15 per cent of Slovakia's export earnings.
Volkswagen's largest export markets are Germany, Italy, France, Austria and Japan.
25. Feb 2002 at 0:00 | Dewey Smolka