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Audi news - Hungary
Just a tidbit of Audi news to chew on (low calorie, low fat... especially
good after the holiday...)
GYOR, Hungary, Nov 27 (Reuter) - Volkswagen <VOWG.F> is
blazing a new path in former communist eastern Europe by having
its Audi AG division build a premium model in Hungary from
``It's easy to buy the best machines and technology to build
a car, but it's not always easy to retrain workers with old
habits,'' said Karl Huebser, managing director of Audi Hungaria
Motor Kft (AHM), the Audi subsidiary in Gyor, western Hungary,
where the TT convertibles and coupes will be built.
``However, in Hungary, we have a green field site that is
building new products,'' Huebser said during a tour of AHM for
``And the workers are flexible, so it's really a great chance
to make this car here in one of the most modern plants in the
Since the Berlin Wall fell in 1989, automakers have poured
more than $6.0 billion into the region, but most of the
investments have been geared to building micro-to-medium-sized
cars that are affordable, practical and not very glamourous.
In sharp contrast, Audi has chosen the region to assemble
the TT, a recently unveiled sports car aimed at devotees of
conspicuous consumption. It will compete with two other flashy
roadsters from Germany -- the SLK from Mercedes-Benz AG <DAIG.F>
and the Z3 from BMW AG <BMWG.F>.
FIRST MODEL PRODUCED OUTSIDE GERMANY
The TT is the first model that Audi will launch into
production outside Germany, but the company said the
opportunities outweigh the risks in assembling a high-profile
car in a developing country like Hungary.
AHM will only assemble the TT, and most of the planned
output of 30,000 units a year will be exported to the United
States and western Europe, but the venture raises the profile of
AHM, an engine manufacturer that plans to invest roughly 1.0
billion marks by 1999.
GYOR PLANT A HIGH-TECH SHOWCASE
The plant itself is a striking showcase for Audi, as the
facilities and equipment look and sound nothing like a complex
of intensive industrial production.
Machine operators, dressed neatly in bright red overalls,
perform high-tech tasks in an atmosphere of orderliness and
The only obvious signs of wear and tear from the plant's two
years of operations are tread marks on the still-white floor
from bicycles that workers ride between tasks across the vast
50,000 square metre (538,200 square feet) production hall.
``If there are any major noises, that means there is a
problem,'' Huebser said.
Most important, analysts said, plans to assemble the TT in
Hungary point to VW's drive to replicate in central and eastern
Europe its position as the top-selling brand in western Europe.
``VW has been the most aggressive of western European
automakers in pursuing opportunities in the old East Bloc, and
it now has a formidable manufacturing presence in the region,''
one analyst said.
``The TT project in Hungary is a colourful way for VW to say,
`We're dead serious about this part of Europe, too.' And VW may
be trying to show that it has a variety of ammunition to fire in
the battle for market share with Korean automakers marching into
VW LEADS IN EAST EUROPE VENTURES
Since 1991, VW has bought, built or licensed plants in the
Czech Republic, Poland, Russia and Slovakia. It is considering
similar ventures in Belarus and Macedonia.
In contrast, Adam Opel AG is the only other automaker based
in western Europe now building cars in more than one country in
central and eastern Europe, and it is owned by U.S. giant
General Motors Corp <GM.N>.
Meanwhile, Korean conglomerate Daewoo Group 1/8DWGR.CN3/8 has
started building vehicles in the Czech Republic, Poland,
Romania, Russia and Uzbekistan. Hyundai Group 1/8HYGR.CN3/8
<67510.KS> and Kia Motors Corp <67500.KS> have been planning
vehicle production in Poland and the former Soviet Union.
``Many automakers from western Europe have viewed eastern
Europe as their backyard,'' said Nigel Griffiths, an auto analyst
with DRI/McGraw-Hill in London. ``But they are running some risk
of losing market share by staying on the sidelines while the
Korean automakers continue to penetrate the region.''
VW has been acutely aware of Asian competitors offering
low-cost cars, as its per-car profits are among the lowest in
the global auto industry, partly because Germans rank as the
world's highest-paid workers.
VW has sought to boost its competitiveness and efficiency
through investments in central and eastern Europe, and AHM will
play an increasingly important role, analysts said.
ATTRACTIONS OF HUNGARY
AHM, which began building four-cylinder engines in 1994,
plans to start producing V6 engines in early 1997, and it will
assemble and partly manufacture all Audi engines by mid-1998,
Audi spokesman Jurgen DeGraeve told Reuters.
``Hungary offers us the flexibility to work continuously --
three shifts, 24 hours a day, seven days a week,'' DeGraeve said.
``It is difficult for manfacturers to do this in Germany.''
AHM-built engines eventually will fit models from each VW
brand, including Octavias of Czech automaker Skoda automobilova
AS, which is owned 70 percent by VW.
The Hungarian company also might build a new diesel engine,
but Audi officials declined to comment on the details. They are
reluctant to discuss AHM's growing role in the VW group because
of mounting concerns in Germany about domestic companies moving
production to foreign markets to reduce costs.
``Audi still is the most German of the German automakers,''
DeGraeve said. ``Our objective is to produce as much as possible
in Germany and as much as necessary abroad.''
Though Skoda represents VW's biggest investment in former
communist Europe, Audi chose Hungary over the Czech Republic for
the engine plant that now is AHM, DeGraeve said.
``The Czechs and the Hungarians are now at the same wage
level, but the Audi engine plant in Hungary has the flexibility
that simply is not possible in the Czech Republic,'' he said.
But the inflexibility of some Hungarian authorities has
diluted AHM's gains in savings and efficiency, Audi officials
Despite the problems, Huebser said AHM has been successful,
earning profits of 30 million marks ($19.8 million) last year.
He said returns would be ``significantly better'' in 1996, when
engine production is expected to rise to 216,000 units from
106,000 units in 1995.
"Perception is often stronger than reality!"