FRENCH auto giant PSA Peugeot Citroen has announced it will be building a new 700 million euro factory in the west Slovak town of Trnava. The announcement came a week after the cabinet agreed on a package of investment incentives for the carmaker.
Although the decision was not due until the end of January, Peugeot officials said that Slovakia had won out over rival locations in Poland due to Trnava's central location and infrastructure, as well as the possibility to develop an industrial park for suppliers next to the plant.
In the January 15 announcement, Peugeot also credited the Trnava site with an established "manufacturing tradition and the availability of well-educated labour".
"The new site will bring the [PSA Citroen] group's manufacturing base closer to markets where it is rapidly strengthening its presence," the statement read.
Slovak state officials in Bratislava reacted warmly to the news, saying the Peugeot plant would create up to 3,500 jobs directly and another 6,000 jobs indirectly by the time the factory comes online in 2006.
"The French investment is the investment of the decade for Slovakia," said economy minister Róbert Nemcsics.
"Joining with a significant European carmaker will bring new work opportunities, will positively influence Slovakia's exports, and will have a fundamental impact on the business environment.
"This investment is the result of several months of negotiations between the investor and the Slovak Economy Ministry and its sub-organisations, as well as extra support from the Slovak government, all the way up to Prime Minister Mikuláš Dzurinda," said Nemcsics.
"What I see as key in this decision is the great trust PSA has placed in Slovakia by deciding to invest here," said Dzurinda at a press conference following the announcement.
"The investment is and will be exceedingly important for the Slovak economy and for the country," he said.
Finance Minister Ivan Mikloš said the state would eventually have to invest Sk6.5 billion (156 million euro) to complete the project, including Sk2.2 billion (53 million euro) this year on construction projects, but that Peugeot's operation in Slovakia could generate up to Sk100 billion (2.5 billion euro) per year in exports once up and running.
Milkoš said the state would avoid using privatisation revenue so as not to affect Slovakia's public deficit.
"For now, we have a concrete proposal to allocate Sk1.1 billion (26 million euro) so we can start construction work," said Mikloš.
Peugeot's move comes as automakers are increasingly looking to EU candidate states in central and eastern Europe as cheap manufacturing bases.
At the end of 2001, automotive imports from central Europe to the EU reached 17.4 billion euro, nearly triple the 6 billion euro imported in 1997. Of that, motor vehicle imports grew from 3.1 billion euro in 1997 to 8.3 billion euro in 2001.
"The move eastward started as a trickle, but it is becoming a fast flowing river," said David Andrews, head of strategy and international relations for the European Association of Automotive Suppliers.
Peugeot itself is planning to increase global sales to 4 million cars annually by 2006, up from 3.25 million in 2002, and has seen its central European market share grow from 5 per cent to 12 per cent in the last five years.
In addition to the Trnava factory, which will be the group's 10th plant, Peugeot is also opening a joint venture with Toyota in the Czech Republic to produce 300,000 cars annually by 2005.
"Our markets have been moving steadily eastwards, but our production units remain rooted in western Europe, so it makes sense to move our centre of gravity east, where sales are growing fastest," said Peugeot spokesperson Hughes Dufour.
In Slovakia, automotive production has become increasingly important to the country's industrial economy. Auto-parts suppliers have seen turnover increase by 67 per cent since 1998, and Volkswagen's Slovak operation has grown into the country's largest industrial concern and greatest source of export income.
20. Jan 2003 at 0:00 | Dewey Smolka