Eastern Europe Vying for New Plant

November 29, 2001

Sacramento - Central and Eastern European governments have watched with envy in what Skoda has done for the Czech Republic. Skoda has become an economy unto itself with suppliers locating around the assembly plant, all providing thousands of jobs and many of the cars being exported, offering the Republic more balanced trade.

As we reported here a few months ago France's PSA Peugeot Citroen and Japan's Toyota have agreed to form a joint venture to build cars in Europe that would be sold under their respective brands. The partners stated from the beginning that they would be looking for cheap, but high quality labor. That translated means they would be looking to Eastern or Central Europe where work ethic is high and labor costs are low.

Ever since then, countries from Poland to Hungary to Bulgaria have been vying for the new auto assembly plant that will build some 300,000 vehicles a year. What these governments are offering in tax and other incentives is kept secret but believed to be as high as any government has ever offered to an automaker. One of the biggest bidders is Bulgaria, which has really fallen behind its Eastern European neighbors in economic reform. The country had become a haven for former Soviet crooks and even the Russian mafia. However, a new prime minister - Simeon Saxe-Coburg - elected last June, has vowed to bring Bulgaria's economy up to its Eastern European neighbor standards, improving living conditions and rooting out the crime. A $1.4 billion auto assembly plant would go a long way in helping Coburg fulfill his campaign promises.

Toyota officials say they will formally sign the j-v agreement with Peugeot next month and plan to announce the location of the plant by mid-January.