GM to Assemble Automobiles in Czechoslovakia
The scramble for Eastern Europe’s emerging auto market intensified Wednesday as General Motors Corp. announced initial plans for a third car assembly plant, this one in Czechoslovakia.
GM said the Czechs chose it from among several auto firms to negotiate conversion of an existing auto factory to assemble GM Opel cars for local sale and to manufacture 250,000 transmissions a year for export.
General Motors, which along with Ford Motor Co. has long had extensive auto manufacturing and sales operations in Western Europe, said it would be the first Western auto firm to set up shop in Czechoslovakia.
But the operation with state-owned truck maker BAZ will be modest compared to an expected linkup between Volkswagen and Skoda, a Czech auto producer considered the best in Eastern Europe.
Germany’s VW--invited in by the new leaders of Eastern Europe--Italian auto maker Fiat and GM lead the race to exploit the turn to free markets in the countries behind the former Iron Curtain, where cars are known for obsolete design and poor quality.
Fiat, which has done business with Soviet auto-making enterprises for decades, has predicted a doubling of the demand for cars in Eastern Europe--to 5 million units annually--by 1995.
That, analysts say, is particularly attractive as Western Europe rushes to eliminate trade barriers in 1992, opening up long-protected markets to at least some increased competition from Japanese auto firms.
Western auto firms have entered into a variety of agreements with state-owned manufacturing enterprises. They often skirt the lack of hard currency in Eastern Europe by agreeing to manufacture products for export on a dollar-for-dollar basis with materials they import.
On Wednesday, Fiat was reported to have promised $2 billion worth of investments in Poland’s auto industry if the Poles agreed to prevent anyone else from building cars there.
Fiat proposed a 15-year plan to create several joint-venture companies in Poland that it would control.
Overall, Fiat is working on auto projects in Poland, Yugoslavia and the Soviet Union. They are valued at $8 billion, according to reports from Europe.
VW has the upper hand in the former East Germany, where the market is expected to grow fastest.
GM said it is too early to put a price on its proposed Czech venture. A similar operation under way in Hungary represents an investment of $150 million, said Ron Theis, a Detroit-based spokesman for GM overseas operations.
The proposed assembly plant in Bratislava would be a “kit” operation, in which workers put together parts shipped in from elsewhere. That is a less extensive process than a full-blown assembly plant with related manufacturing.
The unspecified number of Opels assembled there would be sold in Czechoslovakia through a fledgling dealer network. Auto transmissions built in the same plant would be exported to GM plants in Western Europe for installation in cars sold there.
Employment at the Czech plant could reach as many as 1,000.
A similar GM assembly and manufacturing plant--building engines instead of transmissions--is due to begin production in 1992 in Szentgotthard, Hungary. GM also makes car wiring parts in a Hungarian joint venture, and last month began assembling the Opel Vectra in the eastern German city of Easenach.
Ford is constructing an $80-million plant in Hungary to build components. The U.S.-based company last year pulled out of a consortium negotiating to build cars in the Soviet Union.
Ford has been building cars in Western Europe since the early 1900s. Its vast operations there have surpassed its North American car and truck business in recent years.
GM, however, has nearly drawn even with Ford in the competitive European market. They are ranked fourth and fifth in sales, close behind VW, Fiat and Peugeot.
