On their marques

Poland's automobile industry is enjoying impressive international investments, but has the same problem of carmakers everywhere: as consumer demand slows excess capacity is appearing. Couple to that, the home market remains weak. So industry executives are banking on renewed prosperity when effective highway infrastructure appears in the country and European Union membership is sealed.
Poland's automobile manufacturing industry has expanded by 70% in the last ten years.
The oldest presence on the market, Italy's stricken Fiat, the parent company of the country's auto leader, Fiat Polska, is debating either massive state aid or allowing General Motors to take up its option for the remaining 80% of the shares it does not already own. The impact on Poland could be significant because GM is the owner of the Opel plant at Gliwice in Silesia, while Fiat is a neighbour in Tychy. GM can exercise those rights to acquire a controlling stake in Fiat any time between 2004 and 2009.

Japan's Toyota Motor Corporation has just announced that it will build a €170 million diesel engine factory in the old Jelcz bus factory near Wrocław and is willing to invest more than €500 million in the country. Volkswagen has built a massive new plant in Poznań, which by 2005 will provide 150,000 vehicles a year. Britain's Rover - saved four years ago in a spectacular management buyout - is pondering plans to inject around €225 million to create a new company at Daewoo FSO's bankrupt Polish plant.
These are hardly signs of an ailing industry, yet domestic car consumption is stagnating in the cool economic climate. So, when will these sparkling investments be transformed into lucrative cash?
And is there enough for all to share, especially in the wake of a Fiat-GM linkup which just might make some plant sharing attractive as a cost-saving exercise? Fiat is already scheduled to supply engines to the GM production line in Gliwice, while an "internal merger" of Fiat and GM's internationally troubled Opel subsidiary has already been mooted.
"The situation for Poland is good because there are investments coming to Poland," said Wojciech Drzewiecki, the president of Samar, a company that analyses the automotive market. "This increase in manufacturing demonstrates confidence in the future of Poland."

Global companies, such as Toyota, are making it clear they are investing today on guarantees for tomorrow. Tokuichi Uranishi, the managing director of Toyota Motor Corporation, estimated that the demand for its diesel engines to be engineered in its planned new factory would quickly expand from 180,000 to 300,000 over the next few years.
"Companies are not looking at the current state of today's sales," Drzewiecki said. "It's all about the future."
Indeed, optimism is contagious in the industry, despite the output downturns.
The 2,000 employees at Opel's Gliwice plant are scheduled to build 85,000 cars this year, a significant reduction from 100,000 cars turned out last year. It means that managers at the factory, which produces a single model, are searching for other options to utilise the $620 million facility's excess capacity.

"Something will appear," said David Lane, the plant's manufacturing director. "It's a question of when. If I come back here in 10 year's time this plant will be producing more than 200,000 cars a year. The installed capacity is higher."
In 2001, just eight new cars per 1,000 people (327,200 cars total) were sold in Poland, the lowest ratio in Europe. The equivalent statistic in the Czech Republic was 14 per 1,000.
"There's still a lot of room to grow," Drzewiecki said. He expects that by 2010 ownership levels will embrace 800,000 people.
"In Poland, under-demand in any economy always attracts the attention of large and hungry international corporations," he added.
The domestic industry is united in its conviction that Poland as a part of the Union will boost both local demand and exports.
Romuald Rytwiński, the managing director of General Motors Polska and the plant director of Opel Polska, is bullish on the EU's potential impact. The plant already exports 95% of its production, but the management team is sure membership will soak up excess capacity.

"EU trade will be easier," he said. "No trade borders. This will improve our logistics and make the plant better. Plus, individual purchasing power should increase."
Rytwiński declined to comment on the potential side effects that GM's interest in buying the remaining stake in Fiat, whose plant in nearby Tychy, which employs more than 3,000, would have on Opel's operations.
"I am not thinking what will happen," he said. "I don't know what will be the implications. It's not a direct competitor. They have their own customers; we have our own customers."
Analysts in the Polish market share that opinion.
"They should stay separate brands," Drzewiecki said. "In Poland, Fiat and Opel are treated differently than elsewhere. There is room for both. This is based on the fact that the car density in Poland is very low."
In any event, Opel's view of the market is straightforward. It is independent of the domestic market because of its high export volume, so any growth is good from whatever direction.

As MG Rover looks to create a new car company, its goals are set high. The company will continue to produce Daewoo's Matiz and Lanos models up to 2004 and maintain production at around 100,000 cars every year. In the first stage of investment the British company will sack 3,000 employees and retain a basic workforce of 1,200. The deal with the crippled Korean firm appears finally to have hardened as Daewoo FSO's creditors - six Polish banks - approved a go-ahead for a debt-for-equity swap. What is especially extraordinary is that few expected the Daewoo operation to survive while Rover, which was virtually dumped by BMW as a lost cause, has itself undergone an astonishing revival.
Skoda Auto, the largest Czech automaker and controlled by Germany's Volkswagen, plans to close its manufacturing plant in Poland and return to the Czech Republic. The Polish government's decision to cancel high tariffs on imported cars spurred Skoda to move. Skoda is the number two car producer in Poland, but this year it suffered a larger slump in sales. Its sales fell 29.7% year-on-year in January to April 2002, compared to an average drop of 20.3% for other companies with operations in Poland.
Domestically, foreign carmakers don't look at their international peers as competitors because the Polish market is small. Instead, used car imports carve into the carmakers' already paltry profits with dubious companies transporting cheap and unsafe used cars across the border.
Opel's Lane said that Opel's Astra and Agila do not compete with Fiat's Cinquecento, Siena and Seicento models in Poland.
"It's the 10-year-old Ford Escorts - that's our problem," he said.