Car makers seek fast track deal on new plant
Peugeot-Citroen president Jean-Martin Folz suggested shifting "the centre of gravity" of the company to the east in order to take full advantage of commercial opportunities offered by these markets.
"Low costs of production in these countries are, of course, a determining factor, but not the only one," he said.
The move comes as part of the auto maker's expansion strategy and the planned sales increase to more than four million cars annually by 2006. The new plant would allow for the execution of the strategy after 2006, as PSA will soon reach full production capacity in its nine European plants. Since the concept of constructing the new plant in France was quickly dismissed as too expensive in the face of restrictive French labour markets, the company announced it will shift production lines east after conducting a beauty contest in Poland, the Czech Republic, Slovakia and Hungary.
According to the Polish side in the negotiations, the French car maker and the Polish authorities have been in talks for nearly a year, and the French have already scrutinised the area around Radomsko in south-central Poland as a potential site. The same site was one of the three offered for the Toyota/Peugot car plant.
The new plant would produce 300,000 cars a year, making it one of the largest PSA plants. It would create 3,000 jobs. The production line would turn out small engine cars, such as the Citroen C3 or the new Peugeot 107.
Although the French are likely to remain tight-lipped until a final decision is reached, Polish authorities believe that the negotiations will progress better than they did in 2001.
A Radomsko city spokesman said that city authorities are in talks with PSA with the assistance of PAIZ. PSA had sent PAIZ questionnaires, and the city just received information that it had been shortlisted as the only Polish candidate for the deal. The proposed site was previously intended for the Toyota development.
Car industry analysts are convinced that negotiations are being handled more professionally than last time.
"The chances of attracting this investment are higher than with the Toyota deal, because of the experience the authorities have gained during the previous negotiations," said Wojciech Drzewiecki, president of Polish auto market watcher Samar. "I think now the investment is more realistic."
Drzewiecki expressed his concern regarding the forced shedding of investment incentives prior to EU accession. He said it could serve as a possible deterrent for foreign investors.
"Hopefully, investors will not lose much when the incentives are given up," he said. "But if the incentives will remain reasonable, I'm sure they will only encourage foreign investors."
According to Drzewiecki, foreign companies still perceive the country as a very attractive place to locate automotive investments.
"It is considered a mistake not to have a business presence in Poland," he said.
"Even though the Toyota investment in the Czech Republic may be more prestigious since the plant assembles cars, Toyota car components, such as engines, are produced in Poland. Faurecia, which is a part of PSA, also invests here," he said. "All of this proves that the Polish market is perceived as reliable and positive."
Despite talk that the assembly will include small-engine cars and will also expand to new model production, ailing competitors said they are awaiting further information.
"It's difficult to say how this will affect our company directly because right now we only have very vague information about the negotiations," said Krystyna Danilczyk, spokeswoman for Daewoo-FSO. "The investment itself seems very realistic because Poland offers very competitive conditions in terms of foreign investment.
"It is a question of how long the negotiations will take," she said. "The negotiations with Toyota took too long, and if these talks will also be prolonged, the investors may become discouraged," she added.
According to Nigel Griffiths, an auto analyst at DRI Automotive, part of the Global Insight consultancy, there aren't any specific disadvantages speaking against Poland.
"PSA's choice will depend largely on its final strategy," he said. "Is this plant going to integrate its pan-European operations or is it just a move into Central Europe in order to get a head start before EU accession?"
Griffiths said that the company has also been considering the possibility of moving into Romania, but said that the move seems odd, as it would "leave PSA out of the initial stages of EU entry." He added that, apart from small-engine production, Peugeot could also be considering moving its commercial vehicle line into Central Europe.
"Peugeot is very good at moving its production around in order to optimise its profits," Griffiths said. "It has become very good at this over the last four or five years."
