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Auto Making: The Great Global Equalizer

25 October 2000

    London - Up until ten years ago, in countries like Hungary and Poland, the
state totally controlled the auto business.  The state owned the factories
and state-owned agencies imported and exported vehicles; the state distributed 
the vehicles, making some customers wait for years to get their order.  The cars 
were mostly poor quality, out-dated models.  Today all the big manufacturers in 
EU-candidate countries are privatized and vehicles are bought and sold just as 
they are in advanced industrialized nations.

     Today there are few boundaries between East and West because the auto
industry is so well-integrated across Europe.  It seems like "everybody is
in everybody else's back yard".  Ford has a commercial office in Vienna
handling Austria, Switzerland, Greece , and Eastern Europe.  Volvo has a
plant in Poland and VW's Audi makes most of its engines in Hungary.

     However, the major carmakers have a new broader objective; they are
linking the old east bloc countries to operations worldwide, and they are
doing this by creating plants in Eastern Europe to be exclusive global
sources for specific models.

     Not only are the major automakers eyeing Eastern Europe for specific
global projects, but parts-makers such as Delphi, (the largest) are getting
into the act too.  Delphi recently opened a global technical center in Poland.

     Poland is developing into the automotive heartland of Eastern Europe
for several reasons.  Its consumer base and labor force are both growing
younger, while most European nations are aging.  Also Poland borders
Russia, the biggest market in the east and also borders Germany, the
biggest market in the west, and it is also the main passage for hauling
cross-continental goods, including stolen vehicles.

     Not only are western automakers expanding into Poland, but many Asian
companies see Poland as a beach-head to western Europe.  Isuzu of Japan
last year made the biggest Japanese auto investment in the old east bloc.
Daewoo, whose plans have been foiled 
because of financial woes, had poured over $2 billion into Poland.

     Import tariffs are expected to be eliminated on auto trade between EU
and Poland by 2002.