Current Europe Automotive Report

CENTRAL BULGARIA CIS CZECH REPUBLIC HUNGARY
POLAND ROMANIA RUSSIA SLOVAK REPUBLIC SLOVENIA
Since 1996
EUROPE The Source For Automotive Information On Central Europe™
AUTOMOTIVE July 1998
REPORT™ On The Web at http://www.cear.com™
Volume III, Issue 7 ISSN 1088-1123
Regional Market Poland Profile

Highlights SZC and Hyundai Terminate Agreement Suzuki Opens
Summary On May 28, 1998, Sobieslaw Zasada
Throttle in Hungary:
• Hyundai Quits Poland
Centrum terminated its controversial
cooperation with Hyundai Corp. The two
New Cooperation
• Visteon Snaps Up Polish Suppliers companies were planning to work together With GM &
• GM & Suzuki Will Jointly Produce and assemble Hyundai’s Atos and Accent
Small Car models in Starachowice, Poland. Sales Up 40%
• Bridgestone in JV With Polish
Tiremaker According to SZC’s announcement, the Suzuki is shifting into high gear in
• Daewoo FSO To Start Pilot Engine reason for terminating negotiations was Hungary. In May, the company announced
Production Hyundai’s withdrawal from the project’s that it has agreed with General Motors to
• Eaton Buys Polish Transmission co-financing arrangement, reportedly due jointly develop a new model for the small
Company to the crisis in Korea. SZC also failed to car segment. Suzuki will manufacture the
• Skoda Plzen Selling Truckmaker obtain permission from the Ministry of car at its plant in
Tatra the Economy to extend the May 29 Esztergom Hungary,
• Lucas Building Fast Fit Centers in deadline for submitting required while GM will
Czech Republic documents. produce the car at its
• CZ Builds 2 Millionth Gearbox for
Skoda-Auto new factory in
Visteon Buys Companies In Poland
• Slovak CV Producer Looks to Gliwice, Poland.
Germany for Business On May 27, 1998, Visteon Suzuki plans to
• Daewoo Buys Romanian Vehicle Automotive Systems announced that produce 50,000 of the
Maker it purchased two automotive new cars and will
component companies in Poland. market them under its
own name.
In This Issue The two companies — Pol-Mot
Feature Country: Hungary Praszka in Praszka, Poland and Pol- And on the sales
Mot ZEM in Duszniki Zdroj, Poland front, business is
• Regional Report — Powertrain Producers: p. 5 — were acquired from Pol-Mot Dr. Frigyes Banki booming for Suzuki
• Poland’s Controversial Auto Excise Tax: p. 6 Holding in Warsaw and will be as sales were up 40%
• Measuring Intellectual Capital: p. 9
renamed Visteon Poland SA and Visteon during the first five months of 1998.
ZEM SA respectively.
• Slovak Car Park Analysis: p. 10
To find our more about Suzuki’s plans for
• Quality Expectations Part II: p. 11
Visteon Poland SA has 1,620 employees Hungary, the CEAR spoke with Dr. Frigyes
• Polish Fund Reorganizes Auto Holdings: p. 13 and produces air brakes, coil springs, oil Banki, Deputy General Manager and
• Russia’s Auto Investment Incentives: p. 14 and water pumps, and aluminum castings. Member of the Board of Suzuki’s
• Tax & Legal Update: p. 15 Visteon ZEM SA has 620 employees and subsidiary in Hungary, Magyar Suzuki.
• Romania 1st Quarter Numbers: pp. 15, 16 manufactures wiper systems and cooling
• Investment Opportunities: p. 17 and blower system motors. Visteon plans CEAR: Can you give us an update on
• 5 Questions With Skoda’s Detlef Wittig: p. 19 substantial site, equipment, and training Suzuki’s joint production agreement
• Romanian Distributor List: p. 21 investments at the two facilities.
with GM?
• Chrysler Saves $20 Million Per Plant: p. 22 Banki: This is a new challenge for Magyar
• Audi Cranking Out Engines in Hungary: p. 24
“These two companies offer Visteon an
Continued on Page 2 Continued on Page 12
CEAR Central Europe Automotive Forum™ at http://www.cear.com/autoforum. The CEAR.COM™ Web Site averages over 4,500 hits per month!
Highlights Continued from Page 1 bus and van transmissions in Poland.
CENTRAL The company also manufactures
EUROPE excellent base to grow its business in truck transfer boxes, power take-
AUTOMOTIVE Central and Eastern Europe and create offs, splitter boxes, and gear shift
REPORT™ export opportunities into Western mechanisms for domestic and export
Europe,” said Visteon’s John Kill, markets. FPS has annual sales of
European Operations Director. approximately $20 million and about
July 1998 900 employees.
Volume III, Issue 7, ISSN 1088-1123 “They will offer a local high quality
supply base for the increasing number of Bridgestone In Joint Venture With
Western automotive companies who are Polish Tiremaker
moving into Central and Eastern Europe.
The two Polish plants will also provide a Bridgestone Corp. is establishing a
highly competitive production base tire manufacturing joint venture in
ideally located for exports to Western Poland with the state-owned Stomil
Europe.” Poznan SA. The joint venture will
be officially registered in July of this
Visteon, an enterprise of Ford Motor year, and production is expected to
Ronald F. Suponcic, Jr. Jeffrey A. Jones, Esq. Company, is targeting 20 percent of its begin by July of 2000 with about
Publisher Editor-in-Chief growth from non-Ford business. 300 workers. Initial capacity will be
5,000 passenger car and commercial
Editorial Assistant GM & Suzuki Will Cooperate on New van tires a day.
Barbora Grossmannova Small Car Project
Research Assistant Stomil is 100% owned by the State
Katarina Trginova General Motors Europe and Suzuki Treasury. In such cases, permission
Motor Corp. have agreed to jointly for a joint venture must be issued by
Design develop a new vehicle in the small car both the Ministry of the Treasury
Big Sky Creative
Caroline Bond,
segment. The car will be built in GM’s and the Ministry of Internal Affairs
cetmdes@ibm.net new plant in Gliwice, Poland and in and Administration.
Suzuki’s factory in Esztergom, Hungary.
Web Site Design Start of production is planned for the Unofficially, it has been reported that
Big Sky Creative beginning of the year 2000. Each Bridgestone will hold 71.2% of the
Ron St Clair
cetmdes@ibm.net company will market the car under its shares in the joint venture. Company
own brand name in Europe. capital will total $63 million.
Reporters
Catalin Dimofte, Bucharest When production of the new car begins at Stomil Poznan manufactures special-
Magda Sowinska, Warsaw
Pavol Varga, Bratislava
GM’s Polish factory, annual capacity will purpose tires for such sectors as
Bostjan Okorn, Ljubljana be increased from 70,000 units to aviation, the army, mining, and for
150,000 units. Investments totaling DM industrial vehicles and trucks. It is
Columnists 375 million ($200 million) will be made among the special-importance plants
Ray Barker, Avon Rubber by GM to expand capacity. The mentioned in the Defense Act and
Dr. Jan Lesinsky, Slovak Technical University
Dr. Johan Roos, Intl. Inst. for Management Devel. workforce at the Gliwice plant will also the Official Secrets Act. According
be increased from 2,000 to 3,000 people. to the daily Rzeczpospolita, in 1997
The CENTRAL EUROPE AUTOMOTIVE REPORT™, Stomil Poznan recorded revenues of
4800 Baseline Rd., Suite E104-340, Boulder, CO GM/Opel’s version of the small car will PZL 71 million and a profit of PZL
80303, USA, is published monthly, except August, by
Central European Trade & Marketing, L.L.C. in Boulder,
be available with two recently introduced 3.8 million.
Colorado. ECOTEC engines — a 1.0 liter 12-valve
three-cylinder engine and a 1.2 liter 16- “[The joint venture] proves that we
The entire contents of this magazine in print and valve four-cylinder engine. are very much concerned about [the
electronic formats are copyrighted 1998 by Central Polish] market,” Bridgestone/
European Trade & Marketing, L.L.C. with all rights
reserved. Reproduction or use in any form, without Eaton Purchases Poland’s Biggest Firestone Polska sales and marketing
permission, is prohibited. Annual subscriptions are Transmission Manufacturer manager Grzegorz Krzyzanowski
USD$295 for the Standard Print and Email Edition and told the CEAR. “It will be a big step
USD$495 for the Analyst Edition. Eaton Corporation announced in June forward for us.”
Business, Editorial, Subscription, Advertising,
that it has signed a preliminary agreement
Market Research, Delivery Problem Inquiries to: to purchase Fabryka Przekladni The Bridgestone joint venture will
Samochodowych (FPS), a truck compete for business with Goodyear
CENTRAL EUROPE AUTOMOTIVE REPORT™ transmission manufacturing company and Michelin who already operate in
Business and Circulation Office based in Gdansk, Poland. The Poland through their own joint
4800 Baseline Rd., Suite E104-340
Boulder, CO 80303 USA transaction, which is for an undisclosed ventures.
Tel: +1-440-843-9658 Fax: +1-206-374-5282 amount, is subject to governmental
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Bratislava • Bucharest • Budapest • Cleveland
More Market Highlights
FPS is the largest manufacturer of truck,
Ljubljana • Prague • Warsaw on Page 4
2 July 1998 • CENTRAL EUROPE AUTOMOTIVE REPORT™ http://www.cear.com™ © Central European Trade & Marketing, L.L.C. 1998
CENTRAL
1998
EUROPE
AUTOMOTIVE
REPORT™
EDITORIAL C
EDITORIA ALENDA
CA R
LENDAR
The Source For Automotive Information On Central Europe
On The Web at http://www.cear.com
Issue Feature Automotive Reviews Special Reports Close Date

Jan 99 Poland Body/Chassis 1998 Year in Review/ Dec 10, 1998
1999 Forecast
Feb 99 Hungary Central Europe’s Vehicle Fleets Jan 10, 1999

Executive of the Year
Mar 99 Czech Republic Components & Systems Auto Aftermarket Feb 10, 1999
Apr 99 Slovak Republic Marketing & Advertising na Mar 10, 1999
May 99 Romania/Bulgaria Electronics Auto Consultants Apr 10, 1999
Jun 99 Poland/Slovenia OEM Special: Who Supplies Who na May 10, 1999
Jul 98 Hungary Powertrain Exporting to Jun 10, 1998

Central Europe
Aug 98 Not Published
Sep 98 Czech Republic Plastics Auto Engineering Aug 10, 1998
Oct 98 Slovak Republic Logistics Human Resources Sep 10, 1998
Nov 98 Romania/Bulgaria Interiors Real Estate Oct 10, 1998
Dec 98 Poland/Slovenia Financing na Nov 10, 1998
Regular Monthly Columns

Feature Country - featured country market overview and news, plus updates from around the region
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Product News - information on new products, components, and vehicles in the market
Opportunity Spotlight - regional companies offering investment, joint venture, or partnership opportunities
Quality Corner - information on improving supplier quality in the region
Legal Advisor - updates on legislation and legal matters pertaining to the automotive industry
Focus On Investment - investment analysis of regional automotive related companies
Accounting & Finance - updates on accounting, tax, and customs changes pertaining to the automotive industry
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Bratislava • Bucharest • Budapest • Cleveland • Ljubljana • Prague • Warsaw

Highlights Continued from Page 2 • Mobil Delvac 1 SHC oil from Mobil Network
Oil Francaise of France;
Centra To Supply VW With Batteries • an unleaded universal gasoline from Lucas Autobrzdy, a joint venture
CPN SA of Poland; between Lucas Varity and the Czech
According to Krzysztof Paulus, director • Eagle tires from the Goodyear Tire company Ateso, has started the roll out
general of Polish battery producer and Rubber Co. of Luxembourg; of its network of fast-fit centers in the
Centra SA in Poznan, Centra will start • the Frigo family of winter tires from Czech Republic. The first center was
to supply batteries to the Volkswagen the Debica Tire Company in opened on May 15, 1998 in the city of
factory in Wolfsburg at the end of this Poland; Most and 2 or 3 additional centers will
year. • an electronic fuel consumption be opened in Brno in the near future.
measurement system from
“We need to obtain Volkswagen Mannesman VDO AG of By the end of 1998, Lucas expects to
certificates for our products first,” Paulus Germany; open 22 fast-fit centers in the Czech
told the CEAR. • the Niedzwiedz-Lock II blocking Republic. By the end of 1999, the
device for gear shifts from company plans to have 40 centers. The
Centra has already received VDA6, Niedzwiedz-Lock SC of Lubon, centers will initially specialize in brakes
which is required by Volkswagen, Audi Poland; and shock absorbers, with other products
and Mercedes. In mid July, according to • the Amsterdam car radio from to be added in the future.
Paulus, the company will undergo Blaupunkt GmbH Bosch Gruppe
auditing for QS 9000 certification, which of Germany; AMP Investing In New Plant
is necessary to enter the American • the H4 car light bulb from
market. The next step will be Gluehlampenwerk Aachen of The US company AMP Inc. is investing
Volkswagen certificates, which Centra Germany; and $21 million into a new auto parts plant in
should obtain in October. • anti-dust filters from WIX-Filtron Kurim, Czech Republic, according to the
Sp. z o.o. of Gostynin, Poland. Czech daily Mlada fronta Dnes. The
One out of every two storage batteries factory will produce connectors and
sold in Poland comes from Centra. The Delphi May Build Technical Center bunched cables for cars, and will employ
company plans to produce 2.6 million about 750 workers.
batteries this year, 30% of which will be Delphi Automotive Systems is
exported mainly to Germany, France, considering plans to build a Technical CZ Strakonice Produces 2 Million
Great Britain, Russia, and Belarus. Center in Poland that would specialize in Gearboxes for Skoda-Auto
Exide is the majority owner of Centra design engineering work for the car
and some export is done within its industry, according to reports by the On June 2, 1998, the Czech company CZ
distribution chain. Polish Press Agency. Strakonice produced the two millionth
gearbox for Skoda-Auto in Mlada
Daewoo FSO To Begin Pilot Daewoo Teams Up With Akzo Nobel Boleslav, Czech Republic. CZ produces
Production Of L-4 Engine For Paint Supply gearboxes for Skoda’s Felicia and
Favorit models.
In December 1999, Daewoo-FSO’s Akzo Nobel Car Refinishes Polska and
Zeran (Warsaw) factory will start pilot Centrum Daewoo have signed an CZ Vice Chairman Lubos Kubista told
production of new L-4 engines, said agreement for the use of Sikkens paints the CEAR that the company is also
Krystyna Danilczyk, press spokeswoman and renovation materials by authorized currently involved in negotiations with
for Daewoo-FSO. Daewoo service stations. The agreement Volkswagen regarding the production of
is aimed at improving the quality of body turbochargers. CZ produces
Planned production capacity is 200,000 and paint jobs offered by Daewoo. turbochargers primarily for trucks and
units per year, of which 100,000 will be agricultural tractors — John Deere is
for the new Matiz model, 50,000 for the Rumors About Japanese Investments one of the company’s key customers.
new F-100 van, and the rest will be Circulating Again
exported. Total investment in the project In addition to gearboxes and
should total $200 million. The L-4 More rumors are circulating that Toyota turbochargers, CZ produces vehicle
engine offers multi-point fuel injection, Motor Corp. will build a passenger car chains, motorcycle components,
1.0 or 1.2 liter capacity, and 62hp or transmission factory in Poland. The aluminum castings, molds, and machine
71hp. locations mentioned as possible sites tools.
include the special economic zones in
Gold Medals Awarded at Poznan Walbrzych and Legnica. The Japanese Skoda a.s. (Plzen) Selling Tatra
International Motor Fair press is also speculating that Calsonic
Corp. shortly intends to form a joint The Czech engineering group Skoda a.s.
Nine gold medals were presented at this venture with Polmo Kalisz for the announced in early June that it plans to
year’s International Motor Fair in production of parts for air-conditioning sell its heavily indebted truckmaker
Poznan, which took place in late May. systems. Tatra a.s. In addition to Tatra, whose
Participating in the fair were 800 debt currently runs at around CZK 3
exhibitors, including 140 from abroad. Czech Republic billion ($90 million), Skoda also plans to
sell its ailing press making unit
The awards went to: Lucas Establishing Fast-Fit Center
Continued on Page 18
and power transmission products,
Plenty of Power in Central Europe including constant velocity joints
and half shafts.
Auto Powertrain Review • FPS Tczew — Gearbox producer is
majority-owned by Zasada.
• Polmo Szeczencin — driveshaft
producer owned by PIAST
E
ngines, transmissions, shafts — supply GM in Europe and Poland. National Investment Fund
all of these powertrain products Production will begin by mid-1999 and
are manufactured or assembled annual output will hit 300,000 units by Czech Republic
by companies throughout Central the year 2000.
Europe. The sector has seen significant • Skoda Auto — Produces two types
investment as manufacturers establish The Daewoo-owned Andoria engine of engines, a 1.3 MPI, 1289cc, 40
plants in the region to supply local plant produces diesel engines in kW/54 BHP and 1.3 MPI, 1289cc,
customers and for export. Andrychow, Poland. 50 kW/68 BHP.
• Daewoo Avia — Produces 3.6-liter,
Major Engine & Transmission In December 1999, Daewoo-FSO’s 4-cylinder diesel engines at plant
Production in Hungary Warsaw factory will start pilot production outside of Prague.
of the new L-4 engines. Planned • Praga — Produces mechanical
Hungary is home to two major production capacity is 200,000 units per gearboxes for trucks, buses,
powertrain manufacturers — Audi and year, of which 100,000 will be for the tractors, and special vehicles.
General Motors. Not only are these new Matiz model, 50,000 for the new F- Daewoo Avia is one of Praga’s
companies currently producing in 100 van, and the rest will be exported. biggest customers for gearboxes.
Hungary, but they are actively
expanding their manufacturing In September 1997, GKN started Hungary
footprints in the country. constructing its new $32 million facility
in Olesnica, Poland. The new plant will • Opel — Produces engines at plant
GM has produced engines in Hungary manufacture driveline and power in Szentgotthard. At full capacity,
since 1992. In 1997, the company transmission products, including constant plant will produce 460,000 engines.
completed a DM 50 million expansion velocity joints and half shafts, for supply Investing $128 million into new
of its plant in Szentgotthard which, at to customers within Poland, including transmission production.
full capacity, will produce 460,000 Fiat, and for export. • Audi Hungaria Motor —
engines per year. The plant currently Produces four-cylinder, V6, and V8
builds 1.4 liter and 1.6 liter 16-valve Initial production at GKN’s plant is engines for export.
Ecotec engines for export and the local planned at 300,000 vehicle sets, and • VAW — Operates large cylinder
market. increasing to 500,000 vehicle sets in the head and engine block plant in
near future. Hungary.
GM recently announced that it is • RABA — Diesel engine producer.
expanding its presence in Hungary. The Below is a quick look at some of the key • UKM Rekard — Privatized
company is investing $128 million into powertrain product producers in company produces driveshafts and
a new transmission factory that will go Central Europe gearboxes.
on line in the year 2001.
Poland Slovak Republic
Audi’s engine plant in Hungary has
grown to be the company’s main engine • Isuzu Motors — diesel engine • VW Bratislava — Produces
production site. Since 1994, Audi has factory under construction. gearboxes and gearbox
manufactured engines in Hungary, • Fiat Auto Poland — produces components. In 1997, production
primarily for export to Germany (Audi engines at its Bielsko Biala plant capacity was 259,000 gearboxes —
& VW) and the Czech Republic • Daewoo FSO — starting pilot goal for 1998 is 322,000 units and 7
(Skoda). Audi assembles four-cylinder, production of new L-4 engines million components.
V6, and V8 engines. In April, the • Andoria — Diesel engine producer • Sachs Trnava — Produces
company started assembling vehicles in 40% owned by Daewoo supplies passenger car and truck clutches.
Hungary. (for more on Audi Hungaria, Daewoo Motor Polska Supplies Skoda with 100% of its
see Company Spotlight on page 24) • Eaton — Has signed a preliminary clutch needs. Expanding to
agreement to purchase Fabryka produce torque converters for
Poland Attracts Big Names Przekladni Samochodowych, the trucks and buses.
largest manufacturer of truck, bus,
Poland’s powertrain producers include and van transmissions in Poland. Romania
some of the auto industry’s biggest • Delphi — Building new greenfield
names, including Fiat, Daewoo, Isuzu, factory in the Special Economic Zone • Daewoo Automobile Romania —
Delphi, Eaton, and GKN. in Tychy to produce driveline half In 1997, invested $450 million into
shafts and steering components. engine and transaxle shop. Engines
Isuzu is constructing a DM 300 million • GKN Automotive Polska — New and transaxles are shipped to
diesel engine factory in Poland to factory will manufacture driveline
© Central European Trade & Marketing, L.L.C. 1998 http://www.cear.com™ CENTRAL EUROPE AUTOMOTIVE REPORT™ • July 1998 5
Poland Plans Excise Tax on Import & The current system is also unpopular in
Sale of Cars governmental circles as it is easily
avoidable. Foreign importers are able to
diminish tax levies by importing into
Import/Export Help Desk Poland poorly equipped cars and
Mariusz Maciejewski, Price Waterhouse, Warsaw
installing additional equipment after sale
in Poland.
T
he Polish government is planning (which currently amounts to a 35% full
to introduce a 2% excise tax on rate!). New Tax Would Hurt Local Producers
the importation and sale of cars.
The project is very advanced and if Cars are further subject to a 22% import If the new system were introduced, it
successful might mean a significant or domestic VAT. The system may be would primarily hit producers of cars
reduction in the cost of importing luxury regarded as part of priced below the
cars into Poland. On the other hand, it the broader strategy 7,500 ECU
might lead to a significant increase of of the Polish threshold,
prices for cars in the medium and low government, aimed at “The introduction of the especially those
price segment of the market. encouraging big based in Poland
automotive producers
new excise tax system who get the
Tax Accumulates Through Sales to set up their plants would be the first step greatest benefit
Chain in Poland rather than
import cars produced
by a Polish government from the current
system. In fact, the
The new system would provide for a 2% elsewhere. to reduce the benefits of introduction of the
excise tax levied upon each transaction automotive producers new system would
in the sales chain until the car is first Current System be the first step by
registered. Depending on the length of Tweaks Importers who have invested in a Polish
the chain of transactions, the tax could & Government Poland.” government to
thus accumulate substantially on route to reduce the benefits
the consumer. No threshold is foreseen in The current system is of automotive
the draft which means that even very strongly criticized by producers who
cheap cars would be subject to the excise importers. First of have invested in
tax. all, it has negative impact on the safety Poland.
of cars on Polish roads as in practice it is
The current system in Poland provides mainly additional safety equipment — The financial manager of Daewoo - FSO
for excise tax on sales of cars whose such as ABS, extra air-bag — which puts Janusz Lach has given his negative
value exceeds 7,500 ECU. The tax rate is importers in an excise tax position. It is evaluation of the government’s proposal
10 % for cars sold domestically, levied also questionable whether the difference in the Rzeczpospolita newspaper saying
on their sales value. For imported cars in excise tax on Polish and foreign cars is that it is a manifestation of fiscalism. He
the excise is 15%, levied on the basis of in line with Polish obligations under said that the ministerial plans are seen as
customs value increased by customs duty GATT 1994. a bow towards western producers with
total disregard for those who produce
Magyar Suzuki’s Key Numbers cars in Poland and create employment in
the country.
1998 (forecast) 1997 It is still an open question as to whether

Production (units) 70,000 63,500 the new system is in line with Polish
Exports (units) 50,000 47,700 obligations under free trade agreements
Turnover (forints) 85-86 billion 77 billion that prohibit the introduction of new
Profit (forints) 1.6 billion 1.6 billion taxes. Specifically, Article 25 of the
Europe Agreement establishing an
$US = 212 forints (June 1998) association between Poland and the EC
and its member states prohibits
introduction of new, or increases of
Source: Magyar Suzuki
existing customs duties on imports or
charges having equivalent effect.
New Expert Directories On-Line The new rules might also prompt the
Place Your Contact Information in the new Central Europe Expert Directories on automotive industry to soak in
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Polish Vehicle Market Segmentation (YTD April 1998)
Segment YTD SALES (Units) CHANGE (%) MARKET SHARE (%) SALES IN APRIL
1998 1997 1998 1997 1998 1997
1. Segment A 34,457 36,094 -4.54 25.06 27.63 13,794 12,010
2. Segment B 27,487 33,141 -17.06 19.99 25.37 11,276 11,035
3. Segment C 58,371 41,753 39.80 42.44 31.96 21,060 16,896
4. Segment C/D 14,290 17,458 -18.15 10.39 13.36 5,629 4,532
5. Segment D/E 1,733 635 172.91 1.26 0.49 806 262
6. Segment F 31 29 6.90 0.02 0.02 21 15
7. Segment S 298 586 0.00 0.00 0.00 142 195
8. Segment MPV 695 778 0.00 0.00 0.00 264 388
9. Segment 4WD 163 161 1.24 0.12 0.12 86 50
Total Passenger Cars 137,525 130,635 5.27 99.28 98.96 53,078 45,383
10. Light Comm. Segment 5,714 7,243 -21.11 46.21 55.07 2,261 2,671
11. Medium Comm. Segment 6,652 5,910 12.55 53.79 44.93 2,498 2,172
Total Commercial Vehicles 12,366 13,153 -5.98 100.00 100.00 4,759 4,843
Source: SAMAR s.c., Local Manufacturers and Official Importers, ACEA
Tips For Success In Central Europe
Overheard in Poznan
I
recently attended a few auto shows in Central Europe, notably Poznan in Poland and Autotec in
the Czech Republic. I spoke with scores of companies and learned a lot about what companies
are doing and what people are thinking.
Although new cars sales growth rates are down in most Central European countries, the pace of
activity in the auto sector is still intense. All companies — car makers, suppliers, distributors, and
financing companies — are out hustling for business and devising new strategies to capture a bigger
chunk of the market. Competition is vicious. It’s not a market for the weak or undercapitalized.
One of the biggest complaints I heard? “There just aren’t enough hours in the week to do everything
we need to do.” People are overworked, staffs are lean, demands are high. The Eastern European
Jeff Jones sales manager for a major Western supplier covers the entire region with a staff of one. Himself. He
works eight days a week.
Others were frustrated by the slow pace of infrastructure development in the region. In Poland, for instance, one truck maker noted
that there is lots of talk about roads and highways, but few results. “For a transit country [like Poland], it’s hard to understand.”
I heard a lot about how Central European customers are demanding more from companies. Customers want faster service (such as
for spare parts delivery), better availability of products, better aftersales service, and higher quality. Why is Lucas Autobrzdy
rolling out a network of fast fit brake and shock absorber centers in the Czech Republic? It’s what their customers are demanding.
Parts sellers told me that Polish customers are now shopping for quality. They have more income and are willing to pay for better
built products. In the past, customers were willing to buy cheaper parts and frequently replace them.
But today, with rising mechanic’s rates (especially in Warsaw), this strategy is becoming cost
prohibitive. Customers see the benefit of buying quality.
One common sentiment is that the Central European market is exciting. “You never know what will
happen next,” said one parts distributor. “Everything is changing so rapidly.” Another Tier one
supplier happily declared, “Our business is booming.”
jones@cear.com
Visit the CEAR Central Europe Automotive Forum™ at http://www.cear.com/autoforum or click here CEAR.COM ™
Fastest Sales Climbers in Poland (YTD April 1998)
Passenger Cars Light Commercial Vehicles Medium Commercial Vehicles

Make Units Change Make Units Change Make Units Change
’98 v. ’97 ’98 v. ’97 ’98 v. ’97
Units Units Units
Daewoo Lanos 10,380 10380 Citroen Berlingo 417 414 Mercedes Vito 804 436
Fiat Siena 9,681 9681 Skoda Pick up 672 355 VW Transporter 559 299
Daewoo Tico 13,171 6216 Renault Kangoo Exp. 35 35 Iveco Daily 332 177
Daewoo Nubira 3,168 3168 Peugeot 306 XA 29 20 Peugeot Boxer 206 130
Toyota Corolla 2,643 2040 Peugeot 106XA 6 5 Mercedes Sprinter 207 104
Fiat Palio Wknd. 1,794 1794 Seat Inca 33 1 Kia Preggio 83 83
Opel Astra 6,198 1533 Piaggio Porter 8 1 Kia Ceres 163 79
Citroen Xsara 1,489 1489 Hyundai H100 P/V 96 42
Toyota Avensis 1,131 1131 Daewoo Lublin 2,675 28
Honda Civic 3,950 1115 Citroen Jumpy 28 28
Source: SAMAR, s.c.
Managing for Excellence The vehicle for measuring IC growth or
decline is the set of indicators used for
Facing the Intellectual Capital Challenge — Part II each category of IC, like customer
Dr. Johan Roos, Professor of General Management and Strategy, capital or process capital. It is these
International Institute for Management Development indicators that permit measurement, not
the IC categories as such. Because these
Intellectual capital is one of the most be measured as much as the stocks. It is measurements must make sense to those
important and sustainable sources of these flows that generate and alter the who measure and be understood by those
competitive advantage for today’s stocks, and it would thus be meaningless being measured, the process of
modern companies — IC is simply the to manage one without the other. identifying indicators is a common sense
driver of future earnings. Most and bottom-up process. The work
companies, however, don’t even know Start with Your Mission involved often increases the awareness
how to measure their IC. Based on last of what is really important in the daily
month’s discussion of the fundamentals Regardless of whether a company or unit life of people in a company.
of IC, this month Dr. Roos will explain is in manufacturing or service, the
and illustrate how car companies purpose, business mission, vision, or This is why the next step is to translate
develop a simple, yet robust goals are always the starting point for an the mission or strategic intent into “key
measurement system of IC IC-management system. This means that, success factors” (KSF). As their name
in principle, each organizational unit implies, KSFs indicate what the
Today, an increasing number of would have different indicators of the particular mission or strategic intent must
companies rethink basic assumptions of different IC categories simply because meet to succeed.
how to point the way into the future. each strategy will be different.
Most executives have already realized The strategy of ensuring low delivered
that profits, market share, and even If the strategy is to compete on price, for costs throughout the business system, for
customer satisfaction are all measures of instance, it is what makes the company instance, has a whole different set of
the current position of the corporation. have low delivered costs that must be success factors than the strategy of
Current product-market combinations captured by the indicators. Here, with a achieving high perceived value from the
and satisfaction measures alone are view of future earnings, indicators could customer’s perspective. The latter would
simply bad predictors for where to make include supplier delivery performance allow a price premium whereas the
money tomorrow. and cost management. former would mean competing on price.
To find the best guidelines for future On the other hand, if the strategy is to The KSFs are once again a reminder for
actions, corporations must examine the compete on high perceived value, the all strategy makers of what are the
deeper and not so visible drivers of indicators must capture what makes this factors that need a constant monitoring.
future earnings, IC. The absurdity is that happen, for example, superior Relevant IC is just the IC that contributes
while a company may just have gone into innovations and quality image. Given to achieving your company mission. It is
“intellectual bankruptcy”, the short-term that every business is unique in some nice to have smart people and fancy
profits may very well rise since costs aspect, each unit will separately have to equipment, but if this doesn’t help you to
have been lowered! develop their own indicators for common win in line with your mission or intent,
categories of IC, like customer capital, the IC they represent is not relevant!
To better manage – nurture and leverage innovation capital, and flow from human
— intellectual capital it is important to capital to structural capital. The best way to demonstrate that KSFs
measure it. In turn, to be able to measure are really key is to measure the
growth or decline in IC it is essential that In Mec-Track, an Italian-based company’s success in each of the KSFs.
the nature of IC itself is clear. This is manufacturer of undercarriage A manager of COSA told me that this
why it is important to distinguish components within the Caterpillar approach becomes obvious to people:
between different forms of intellectual Overseas Division (COSA), “You just go to the people working in the
capital, as well as the dynamics among management grounded their pilot IC- business units and say: ‘So, you say that
these. Whereas many companies have so management system in the newly re- this is important for your business? OK.
far only applied a ‘balance sheet’ worked mission statement: “To Do you have a measurement for this?’
approach to intellectual capital, a strengthen our worldwide leadership ‘Well, no’ ‘Do you think you need a
complementary ‘profit and loss’ position in the production of measurement for this’ ‘Well, yes: I am
approach is a natural extension. undercarriage components by offering to the one who said it is important!’” For
our customers differentiated products of each one of the KSFs, Meg-Trac
A major challenge in companies of today recognized superior value.” The idea was management suggested a few measures
is to have experts share their knowledge to try to measure growth and decline in that would capture its essence.
and skills with others in the organization, only the IC that contributed to reaching
which is an example of a flow from this mission. During the first attempt, most companies
human capital to structural capital. Thus, tend to use non-financial indicators that
flows among the different forms of Measure Your Key Success Factors are already there in the existing
capital, intellectual and material, should
Slovakia’s Car Park industrial and agricultural production are
not intensive enough to sustain higher
Big Variances; Western Region Owns Half of Cars growth levels.
Dr. Jan Lesinsky, Slovak Technical University
TERRITORIAL DISTRIBUTION OF
MOTOR VEHICLES
B
y the year 2010, the number of AUTO SECTOR DEVELOPMENT IN
road motor vehicles worldwide THE SLOVAK REPUBLIC
could increase by 60% and fuel In Slovakia, large differences exist in the
consumption may increase by 50%. In The car fleet in any country can be distribution of cars. In and around
Central and Eastern Europe, a substantial evaluated from several points of view, Bratislava, there are 330 passenger cars
development of the region’s auto sector but most commonly from the relative per 1,000 inhabitants (in the city this
is expected — by the year 2000 vehicle numbers (e.g. per inhabitant, per square figure rises to 340), whereas in the
production will increase by 75% and by km, per road km, per filling station), districts of Trencin, Zilina, and Presov
2005 a 125% increase is expected. This technical progress (e.g. average age), the figure is about 170. In the region of
will raise the region’s share of world driving unit (e.g. percentage of petrol West Slovakia, the inhabitants own more
production from 4% to nearly 10%. and diesel engines and electric motors) than one half of all passenger cars in the
and fuel (e.g. classical, alternative, or whole country. Differences in
Central and Eastern European countries gas). (see charts) employment rate, economic situation,
will become more involved in the location, and entrepreneurial activity
production of basic materials and On January 1, 1998, the breakdown of increase the distribution gap.
systems, as well as in the production, motor vehicles operating on Slovak
use, and recycling of cars. In these roads was: SLOVAKIA COMPARED TO
countries, the automotive industry has NEIGHBORING COUNTRIES
clearly arrived. 83% - passenger cars & vans
10% - trucks, special automobiles, and In the neighbouring states to the west of
In Slovakia, we’re witnessing substantial tractors Slovakia, the average number of cars per
growth in passenger car production. VW 6% - motorcycles over 50cc 1,000 inhabitants is 400, to the North and
Bratislava’s increase in the number of 1% - buses South the figures are about the same as
assembled cars to 150,000 per year, its in Slovakia, (Poland -190, Hungary -
increase in components production, as The number of vehicles in the Slovak 203), while to the East it is much less (50
well as the big changes in surrounding Republic does not grow dramatically — - 80 per 1,000 people). Those countries
countries (mainly the Czech Republic in each category there are fewer vehicles that participate more in car production,
and Poland), are revitalizing our than in the more industrially developed have proportionally a higher number of
machinery industry. countries. In Slovakia, the solvency of cars n
inhabitants and the economic activities in
Regional Distribution of Cars in Slovakia

Density p/1,000 pop. Density p/sq. km % of Pass. Cars % of Pop.
Western Slovakia 239 35 52.5% 46.7%
Central Slovakia 185 15.36 22% 24.7%
Eastern Slovakia 189 18.43 25.5% 28.5%
Comparative World Car Density Figures (1998) Car Density by District in Slovakia
Territory Number of Inhabitants (mil.) Car density* District Car Density per 1,000 Pop.
NAFTA ~ 380 400 Bratislava 330
EU ~ 380 400 Trnava 250
JAP+KOR ~ 170 320 Trencin 175
C. and E. Europe ~ 175 150 Nitra 206
Russia ~ 148 80 Zilina 166
Slovak Republic ~ 5.3 211 Banska Bystrica 203
Poprad 165
*Passenger Cars per 1000 inhabitants Kosice 215
Slovakia’s Car Density (1997)
Car Density p/1,000 pop. Car Density p/sq. km Car Park

211 23.17 1,135,914 units
Quality Expectations of the Global Automotive improvement.”
Industry Part II It is interesting and informative to read

the definition backwards:
Building Supplier Quality: Lesson 4
With Ray Barker, Group Director, Business Excellence Strategy, Avon Rubber Through continual improvement, we can
achieve ever increasing levels of
• customer satisfaction and manage the
L
ast month’s column reviewed QS- Cost of Quality
9000 quality system requirements, • Parts per Million Analysis business, using standardized tools and
including Quality Planning, • Value Analysis practices with a systematic, disciplined
Design Skills, Preliminary Process • Problem Solving approach.
Capability Requirements, On-going • Benchmarking
Process Performance Requirements, • Analysis of Motion/Ergonomics This methodology requires a clear
Measurement System Analysis, and • Mistake Proofing statement of strategic imperatives and
Corrective & Preventive Action. Key Results Measurables. Subsequently
Manufacturing Capabilities the identification of key processes to
This month’s column continues the deliver the results and the quantification
review of requirements, and also covers Suppliers shall use a cross functional of process measurables needs to be
Quality Operating System and Materials team approach for developing facilities, linked to the development of
Management System requirements. processes, and equipment plans in Improvement Action Plans and a
conjunction with the advanced quality Management Review Process.
QS-9000 Quality System planning process. Methods shall be
Requirements (continued) developed for evaluating the Materials Management System
effectiveness of existing operations and Requirements
Training — As a Strategic Issue processes.
Materials Management System
Training should be viewed as a strategic Mistake proofing is the use of process or Requirements as encapsulated by the
issue affecting all of the supplier’s design features to prevent the Ford Motor Company Standard MS-
personnel and training effectiveness shall manufacture of non-conforming product. 9000, define the management
be periodically evaluated. Training must responsibilities and structure to ensure an
develop competencies such that the Suppliers shall establish and implement a effective and efficient Material Planning
benefits may be fully realized to meet system for tooling management, and Logistics function, covering in-
customer expectations. including: bound, internal and out-bound elements
of the “total supplier to manufacturer to
Servicing — Feedback of Information • Maintenance and repair facilities and customer” chain of events.
From Service personnel
• Storage and Recovery The basic elements covered are:
A procedure for communication of • Set-up
information on service concerns to • Tool change programs for perishable • Management Responsibility
manufacturing, engineering, and design tools • Materials Management System
activities shall be established and • Contract Review/Customer Interface
maintained. If any of this work is sub-contracted, a • Scheduling System
tracking and follow-up system is • Document Control
Quality and Productivity Improvements; required. Continued on Page 20
Techniques for Continuous Improvement
Quality Operating System
The supplier shall identify opportunities Requirements
for quality and productivity and
implement appropriate improvement Quality Operating System (QOS) Quality in Action
projects. The supplier shall demonstrate requirements define the mechanism for
knowledge of the following measures continual improvement. In automotive According to one aftermarket
and methodologies and shall use those language it is a way of doing business, as
that are appropriate: expected by the global automotive distributor in Poland, Polish
customer base. customers can now afford to pay
• Capability Indices for higher quality automotive
• Control Charts (variables, attributes) The Ford Motor Company definition of parts. Since last year, customers
• Cumulative Sum Charting QOS is: “A systematic, disciplined have started looking for better
• Design of Experiments approach that uses standardized tools and quality in the parts they buy.
• Theory of Experiments practices to manage business and achieve
• Theory of Constraints ever increasing levels of customer
• Overall Equipment Effectiveness satisfaction through continual
Profile Continued from Page 1
CEAR: How will Magyar Suzuki’s CEAR: How are Suzuki’s sales in
Suzuki. It will be a step-by-step parts purchasing program be changed Hungary for 1998?
development. We will gradually reach by the agreement with GM? Banki: This year we have seen very
the 50,000 [target] capacity. In the Banki: We’re inviting even more rapid growth in the domestic market.
beginning, we’ll produce the current European suppliers [to establish [During the first five months], we’ve
Swift model together with the new car. operations in Central Europe] and we are sold 8,300 cars and we expect to sell
Eventually, production of the new car in discussions with new Hungarian 20,000 units for the whole year. And this
will take the place of the Swift suppliers. Our intention is to localize as looks like a very feasible goal. [Sales are
production. much as possible. This is very important up] about 40% [compared to] last year.
for the new model.
Production is targeted to begin [in CEAR: Why have sales increased so
Hungary] early in the year 2000, and dramatically?
production at GM’s plant in Gliwice Banki: I think the better economic
will begin at the same time. “Magyar Suzuki is the conditions are one of the factors, the
increasing purchasing power [of
CEAR: How much will Suzuki invest center of Suzuki’s Hungarian consumers]. And, of course,
in the new production program? the better image of [Suzuki], our quality,
Banki: Around 15-20 billion yen ($110 future plans in services, and the relatively low cost of
-$145 million), but no final decision has
been made yet.
Europe.” our cars.
We have the best and largest sales

CEAR: Will Suzuki’s and GM’s network in the country. We have 120
versions of the new car be similar? dealerships, which makes a sizeable
Banki: The plan is that the vehicles for CEAR: What percentage of your contribution to our success. These, I
the respective brands will be distinctly parts purchases are made locally? think, are the main factors.
different. We will produce a car with a Banki: As for European local content,
Suzuki 1.3 liter engine and Opel will we are at 70%. [For Central Europe], the The fast development of car [sales] this
produce its car with an Opel engine. The figure is very modest, but we are starting year has been a surprise for everybody.
interior and certain technical aspects will cooperation with some suppliers in At this moment, we are reluctant to
be different, as well. CEFTA countries, like the Czech [expect] the 40% [sales growth rate to
Republic, Poland, and Slovenia. continue for the whole year], but we
CEAR: What kind of facility expect to increase our sales for the whole
expansion will be required for Suzuki? For instance, from the Czech Republic year by 25-30%. For next year, we’ll be
Banki: This year we’ll [start] building a last year we imported [parts valued at] very happy with a 10-15% growth rate.
stamping plant for the [new project]. around 30 million forints ($141,000).
The investment will be around 3.5 billion This year, it will be more than 1 billion CEAR: Will the new Hungarian
forints ($16.5 million). We’re going [to forints ($4.72 million). This is a very government affect you plans in
stamp] medium-sized body parts, not the strong development. Hungary?
bigger parts like doors. Banki: I don’t think so. The basic
The total Central and Eastern European economic goals of the new government
CEAR: By how much will Magyar content of the car is marginal, but we are just the same — to encourage
Suzuki expand its workforce to have rapidly growing contacts with investment and to maintain a predictable
accommodate the new production? suppliers [in those countries]. economic climate. Suzuki asked the
previous government and will ask the
If we reach the target capacity, which CEAR: What markets are you new government to support and promote
means the existing 70,000 capacity [plus targeting for the new car? small and medium sized companies
the 50,000 units planned for the new Banki: First of all, Europe, but also (SMEs).
car], we would need an additional 600 outside of Europe. This [cooperation
workers. agreement] is one part of Suzuki Motor We’d like to see strong SMEs who can
Corp.’s so-called “Global 5” initiative. supply Magyar Suzuki. We [will] not
CEAR: Why did Suzuki decide to Suzuki is trying to achieve a 5% market ease our requirements — price, service,
build the new small car with GM? share out of the total world car market, quality — just because a [supplier]
Banki: To decrease production costs. including Japan. candidate is Hungarian. We are
The two companies will jointly produce responsible for the final product n
stamped parts, [which] reduces tooling Thus, Magyar Suzuki plays a very
costs. Tooling and machinery are important role in Suzuki’s near term
expensive. When we introduced the strategy, both as a production base and as
Swift face-lift in October 1996, just the a sales outlet. Magyar Suzuki is the
tooling cost around 2 billion forints ($9.5 center of Suzuki’s future plans in
million). Europe.
Polish Fund Reorganizes Auto clear. Daewoo and Fiat are valued
customers. We’ve had detailed
discussions with GM and we’re hopeful
Holdings to Take on Aftermarket in a number of areas. With Isuzu, it will
be interesting to see how they’re going to
sort out their supply base because they’re
Change is afoot at the Polish National fund. Some had a clear direction, others very specific. We’d like to think we’re
Investment Fund PIAST. The fund’s didn’t. We pretty much know where going to be able to supply Isuzu in a
automotive holdings are being we’re going with each company. number of areas but they set extremely
reorganized to capitalize on their natural tough criteria and have already
synergy and to enter new markets. Some of the companies established firm
have a number of links with existing
The fund owns six companies active in product groups, “There’s a huge suppliers.
the automotive sector: battery maker sometimes in disparate amount of good will if Of course, we’re
“ZAP” PIASTOW (batteries); FMS markets. Having a
“POLMO” S.A. (steering gears, drive management trying to you actually put it all interested in
supplying Andoria
shafts, and steering shafts); FOS manage different together and leverage who has the new
“POLMO” LODZ S.A. (pneumatic markets, it becomes
braking system compressor, fuel pumps, rather difficult. So it. The sum of the Renault engines —
carburetors); KAPENA S.A. (buses); what we had to do is whole is much greater and we must not
WSK “KRAKOW” S.A. (water pumps, ensure that forget the local
water & oil coolers, oil separators); management groups
than the sum of the truck, bus, and
“FAMAROL” S.A. (agricultural clearly focused on one individual parts.” tractor
equipment). business area. We then manufacturers, with
started splitting the whom we enjoy
Charles Highett is Vice President, company into two or three strategic excellent relations.
Business Development with Eurofund business units or profit centers, or as
Management Polska, the managers of appropriate for the company. We are realistic. If we can’t do it directly
PIAST. Mr. Highett has specific with our own technology, we’ll either
responsibility for the Automotive Group That’s now taking place and it’s created buy licenses or bring in someone to do it
within the fund. The CEAR spoke with an energy all by itself. It’s very with us. Some of these matters are under
Mr. Highett about the changes taking interesting to observe how people who discussion now, but I can’t be more
place at the fund and where the future is now run the SBUs are demanding leaner specific.
for the automotive group. processes and better service. This
creates some tension — but mostly it is What are you doing to improve the
How is the fund reorganizing its healthy. different companies’ product quality
automotive group? levels?
Do you plan to sell off any of the
We’re going to establish a holding companies in the Fund or keep ZAP, FMS Polmo, FOS Polmo Lodz,
company and that’s on target for the third everything together as one entity? and WSK Krakow all got ISO 9000 last
quarter of this year. [But] we’re putting year. FMS Polmo is going for QS 9000
together something more than just a legal Anything that is non-core, we’ll spin off. this year. The rest will be going for QS
framework. We want to make sure [the Anything that is core to our strategy, 9000 as well. And we’ll be looking at
companies all] work together properly. we’ll keep in the fund. If the business ISO 14000. We have to be there and we
and technology is global, we will will be there.
We’re [focused] on trying to make sure probably be going down the route of
that all the systems are right, all the finding a strategic investor, but we want Will you focus on the OE market or
management methodologies are right, to keep a significant stake for ourselves. aftermarket?
and the right culture is in place. We’re
cross relating all sorts of contacts and Investors in the holding company would What we’re aiming at is to principally
technologies. There’s a huge amount of probably not be focused on individual develop in the aftermarket, but not losing
good will if you actually put it all product groupings. They would almost sight of the OE market. We recognize
together and leverage it. The sum of the certainly be either financial investors the aftermarket is in the long run more
whole is much greater than the sum of who are interested in the sector or a likely to give us a stable business and is
the individual parts. strategic investor who has a wider not a globally controlled business. The
interest in the automotive aftermarket. OE business, when you get into
Were any of the companies working subassemblies, for example, is for the
together before the fund brought them What automotive customers are you most part globally controlled. It’s
together? targeting for the companies? difficult to see how small companies can
compete in that market.
No, they were brought together under the In Poland, the key customers are very Continued on Page 20
Russia & CIS Russia’s Auto Sector Investment Incentive
Decree Explained
Watc
atchh Sarah Carey, Partner, Steptoe & Johnson LLP
C
ertain large-scale investments in 135 are granted by declaring the rules, the foreign components, raw
automobile and automotive parts manufacturing facility a “free materials and other inputs in the final
production are eligible for warehouse”, a customs regime under product are subject to import customs
exemptions from import customs duties which components, raw materials and duties (at rates in effect as of the time the
and taxes for a period of up to 7 years other inputs may be imported duty free to inputs are shipped from the facility).
pursuant to Russian Presidential Decree the manufacturing facility and used to
No. 135 of February 5, 1998 (“Decree manufacture a final product which may Local Cost Sourcing Rules for Vehicles
No. 135”). be sold elsewhere in Russia. & Parts
In general, to qualify for the customs Based on the approval of the Russian Vehicles are deemed to meet the local
benefits envisioned by Decree No. 135, Government, the State Customs cost sourcing rules if (1) they are
an investment project must: (1) involve Committee grants the manufacturing manufactured from separate components
total investments of at facility a license per a list approved by the Russian
least 1.5 billion rubles for the operation government1 and (2) the share of costs
($250 million) over a “The customs benefits are of a “free incurred in Russia that are included in
five year period; (2) for warehouse”, the cost of production is 10% for the first
projects with foreign granted by declaring the which may not year of the investment project, 20% for
investment, the foreign manufacturing facility a be revoked the second year, 30% for the third year,
investor must invest without the prior 40% for the fourth year and 50% for the
150 million rubles ($25 ‘free warehouse’, allowing consent of the fifth year and each year thereafter.
million) in the charter components, raw Russian
capital of the Russian Government. While the first part of the test may be
investment vehicle; and materials and other inputs No production intended to ensure that vehicles are
(3) by the end of a five to be imported duty free.” at the actually produced at the manufacturing
year period, at least manufacturing facility, rather than merely assembled
50% of the total facility other from kits, the regulations are somewhat
production costs must than as ambiguous and we are seeking further
be incurred in Russia. authorized by clarification from the Russian
the Russian Government decision to government.
On April 23, 1998, the Russian designate the facility a free warehouse is
Government enacted a series of permitted. For parts, the local costs sourcing rules
regulations spelling out the requirements are met if the annual local cost ratio
of Decree No. 135 in greater detail. Vehicles and automotive parts requirements (i.e., 10% for the first year,
manufactured at an eligible facility 20% for the second year, etc.) are
In order to secure the benefits of Decree within the annual quotas established by complied with. Costs incurred in Russia
No. 135, a Russian entity owning a the Russian government are deemed to are calculated as a ratio of the difference
manufacturing facility must execute an originate in Russia provided the local between overall production costs and the
investment agreement with the Ministry cost sourcing rules established by Decree cost of imported raw materials,
of the Economy and obtain approval No. 135 are complied with. Such components and services to overall
from the Russian Government (Cabinet vehicles and automotive parts are not production costs (Overall Production
of Ministers). Prior to these steps, the subject to import customs duties and Costs - Cost of imported inputs/Overall
Russian company is first required to taxes when shipped from the Production Costs). Production costs are
develop a feasibility study and a business manufacturing facility to the rest of determined in accordance with Russian
plan for the investment project. Russia (such items will, however, be cost accounting rules, which are fairly
subject to domestic VAT and other taxes restrictive and limit the inclusion of
The feasibility study must be reviewed on the sales of vehicles within Russia). certain costs, including interest on loans
by examination boards of the Ministry of used to acquire fixed assets.
the Economy, the Ministry of Finance, Vehicles and automotive parts shipped
the State Construction and Housing from the manufacturing facility that Yearly Reports to Russian
Policy Committee, the State comply with local cost sourcing rules, Government
Environmental Protection Committee but exceed the annual quotas, are subject
and the Fire Prevention Service of the to the normally applicable customs duties Each year an eligible facility must submit
Ministry of Internal Affairs and approved (at the rates in effect as of the time the to the Ministry of Economy, the Ministry
by the Expert Council of the Russian components or raw materials were of Finance and the State Customs
Government. brought to the facility). Committee the following: a report on the
share of expenses incurred in Russia,
Duty Free Imports For vehicles and parts shipped from a certified by the Russian tax authorities; a
manufacturing facility that do not
The customs benefits under Decree No. comply with the local cost sourcing Continued on Page 16
investment credit and the provisions set
Tax, Customs, and Finance Review up for it; and 4) dividend advance must
Ildiko Hadas, Senior Manager, Ernst & Young, Budapest Office be higher or equal to the registered
capital.
A
t the end of 1997, the Hungarian special method, cannot be lower than its
Companies already existing on June 16,
Parliament passed a new registered share capital.
1998 have to apply the provisions in the
Companies Act. This Act will
year 2000 for the first time.
come into force on June 16, 1998 and it Thus, equity minus 1) tied-up capital or
made the modification of some other profit reserve (retained earnings); 2)
Allowance received from a person not
related acts necessary as well, including valuation reserve; 3) difference between
qualified as taxpayer, debts forgiven
several tax and accounting acts. the deferred loss on foreign currency
or assumed by him
Dividend advance
From June 16, 1998, the allowance
“It is a significant change rendered by a resident/non-resident who
From June 16, 1998, a dividend
advance can be paid only if the
that from June 16, 1998 does not qualify in Hungary as a
business activity cannot be taxpayer, as well as the debt forgiven by
interim balance sheet of the company
him will not be handled for CIT purposes
meets the following provisions started in Hungary without a as dividend received, thus the tax base
regarding payment of dividend:
tax number.” cannot be decreased by this sum.
Having paid the dividend advance, the
Registration with the tax authority
equity of the company, computed by a
From June 16, 1998, newly founded
companies will have to register only with
Top Selling Passenger Car Brands in Romania (1st Q)((units sold) the court of registration. They will
receive the tax number, the statistical
Company 1998 1st Q 1997 1st Q % Change number, and social security number (TB-
Dacia 21,794 19,824 9.94%
Daewoo 3,546 3,037 16.75% number) through the court of
ARO 476 317 50.15% registration.
Volkswagen 307 281 9.25%
Skoda 186 65 186.15% Individual entrepreneurs will receive the
Ford 151 198 -23.73% tax number and social security number
Renault 136 34 300.00%
Fiat 72 46 56.52% through the economic chambers.
Kia 67 16 318.75%
Nissan 56 23 143.47% It is a significant change that from
Mercedes Benz 36 43 -16.27% June 16, 1998 business activity cannot
Peugeot 36 7 414.28% be started in Hungary without a tax
Hyundai 32 10 220.00%
Opel 30 24 25.00% number n
Source: APIA
Romanian Car Exports (1st Q)
Romanian Car Exports (in units)
Company Model 1998 1st Q 1997 1st Q % Change

ARO 10 (1.4 liter) 27 54 -50.00%
10 (1.9 liter diesel) 107 133 -19.54%
24 (2.5 liter) - 2 -
24 (2.5-3.2 liter diesel) 2 19 -89.47%
Dacia Berlina 1.4 liter - 410 -
Break 1.4 liter 13 5 160.00%
Nova 1.6 liter 241 29 731.03%
Daewoo Cielo 1.5 liter 1,282 344 272.67%
Espero 1.8 liter - - -
TOTAL 1,672 996 67.87%
Source: APIA
Excellence Continued from Page 9 various indicators into the few IC IC-categories. The filling in of the
categories you have already decided framework, the articulation of KSF and
measurement system: customer make most sense in your situation (see how to come up with adequate measures
satisfaction, market share, defect rate, the first article in this series). can only be done at a local level, by the
etc. This is absolutely normal, and people that know the day-to-day realities
indeed commendable. The Management Challenge Revisited of the business.
The KSF “new products,” for instance, Regardless of whether a company or unit The management challenge from this
may be measured by “number of new is in manufacturing or service, the perspective is to nurture and leverage
products/number of total products.” An purpose, business mission, vision, or growth in your company’s relevant IC –
IC-management system project, however, goals are always the starting point for the one that helps you reach your
often gives rise to new insights regarding what indicators to use. mission — and pick up on early warning
both what will make or break the signs of declining IC.
strategy, and how to measure this in new The creation of an IC management
ways. system is both a top-down and a bottom- This article helps you to begin
up process. The initial start of the idea, developing a tool to manage IC after you
Put Indicators Back into Your IC as well as the initial framework, must measure its growth or decline. The topic
Language come from the topmost layers of the of next month’s article is how to simplify
organization. The COSA team had the management by consolidating the many
Indicators derived from one KSF do not support of Vito Baumgartner, its indicators into a few indices, and a single
necessarily end up in the same IC form. chairman, and even Don Fites, CEO and IC-index. Such an index will enable you
On the contrary, often a single KSF Chairman of Caterpillar Inc. in the to benchmark IC growth or decline
includes aspects of people’s skills, global headquarters in Peoria, Illinois, among units and companies.
money, customer or partner relationships, was informed.
and innovations. The next step is to Next Month: Developing an IC-Index
develop an appropriate IC-management Yet, top management can only supply
“model,” one that allow you to put the the language and the framework — the
Russia Continued from Page 14

Romanian Car Production & Assembly (1st Q)
report on actual investments to date;
Romanian Car Production & Assembly (in units) information on production volumes,
confirmed by an agency designed by the
Company Model 1998 1st Q 1997 1st Q % Change State Customs Committee; and a report
ARO 10 (1.4 liter) 69 230 -70.00% on the extent to which the facility’s
10 (1.9 liter diesel) 80 243 -67.07% quotas have been reached or exceeded
24 (2.5 liter) 75 69 8.69% and amount of customs duties saved by
24 (2.5-3.2 liter diesel) 167 426 -60.79% the manufacturer as a result of the
customs benefits.
Dacia Berlina 1.4 liter 14,601 14,143 3.23%
Break 1.4 liter 4,657 4,797 -2.91% Based upon an analysis of these reports,
Nova 1.6 liter 2,945 2,372 24.15% the Ministry of Economy and the State
Daewoo Cielo 1.5 liter 240 6,526 -96.32% Customs Committee recommend to the
Espero 1.5 liter - - - Russian Government the level of quotas
Espero 1.8 liter 578 780 -25.89% for finished products eligible for import
customs duties exemptions for the
TOTAL 23,412 29,536 -20.73% following year. Quotas for each
manufacturer are established both in
Source: APIA terms of number of units and overall
value.
1
The list contains a minimum
description of components that must be
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CENTRAL
EUROPE Classifieds &
AUTOMOTIVE
REPORT™ Investment Opportunities
Manufacturer of driving fax: 48-22-826-7341 Manufacturer of car & truck supplier to producers of privatization process.
shafts, steering shafts, Poland air and oil filters seeks joint engines for trucks, tractors, Csaba Kilian
steering gears, and spare venture partner for ships, & stationary re: 02/Aut/96
parts seeks foreign investor Manufacturer of hydraulic production, financial, and aggregates. 1996 turnover ITDH
Wieslaw Kosieradzki cylinders, up to 32 bars distribution cooperation. expected to be $20 million. tel: 36-1-118-0051
PIAST pressure, 25-160 piston Monthly air filter capacity Jan Vesely fax: 36-1-118-3732
tel: 48-22-827-8700 diameter, up to 4,000 mm for cars of 60,000, and IESC Hungary
fax: 48-22-826-7341 length, seeks Slovak 6,000 for trucks tel: 420-2-2499-3170
Poland Republic commercial Jorgen Varkonda fax: 420-2-2499-3176 Battery manufacturer seeks
cooperation, offers SNAZIR Czech Republic joint venture partner for
Manufacturer of centrifugal production to order re: Sandrik a.s. processing used vehicle
oil separators, heaters, water Jorgen Varkonda tel: 421-7-5335-175 Partner sought for producer starter batteries
and oil coolers for cars & SNAZIR fax: 421-7-5335-022 of diesel injection $2.1 million
trucks, water pumps for re:Rerosa s.r.o. Slovak Republic equipment for development, Csaba Kilian
vans, trucks, and ships seeks tel: 421-7-5335-175 production, & sale of single re: Perion
foreign investor fax: 421-7-5335-022 Manufacturer of pressed and multi-cylinder in-line ITDH
Wieslaw Kosieradzki Slovak Republic parts for cars, press units, injection pumps for all types tel: 36-1-118-0051
PIAST electric carriages, and of diesel engines, as well as fax: 36-1-118-3732
tel: 48-22-827-8700 Manufacturer of exhaust machine tools seeks for injection systems, Hungary
fax: 48-22-826-7341 flanges, light welded steel commercial or production testing, measuring, &
Poland constructions, agricultural cooperation adjustment equipment. Russian bus company seeks
machines, and hydraulic Jorgen Varkonda 1995 turnover was $40 American joint venture
Manufacturer of fuel supply components under Sauer SNAZIR million. partner to manufacture new
systems for car & van Co. license seeks joint re: BAZ a.s. Jan Vesely bus models. Business plan
engines, compressors for venture partner tel: 421-7-5335-175 IESC available in English
pneumatic braking systems Jorgen Varkonda fax: 421-7-5335-022 tel: 420-2-2499-3170 Victor Sergeyevich
for cars, buses, & farm SNAZIR Slovak Republic fax: 420-2-2499-3176 Kostromin General Director
tractors, compressor units & re: Topolcianske Strojarne Czech Republic Pavlovo Bus Co.
pneumatic fittings, & spare a.s. U.S. partner sought for tel: 7-83171-6-81-14
parts for compressors seeks tel: 421-7-5335-175 Czech producer of Manufacturer of plastic fax: 7-83171-6-03-18
foreign investor fax: 421-7-5335-022 crankshafts (various sizes parts for Opel, Mercedes, Russia
Wieslaw Kosieradzki Slovak Republic up to 2500 mm lengths) for VW, & Suzuki seeks equity
PIAST purpose of contract partner who is engaged in Russian company seeks a
tel: 48-22-827-8700 manufacturing. Company is plastic processing business joint venture partner to re-
$5 million build car and truck tires and
Csaba Kilian recycle tires and other
Get the Word Out, Send Us Your News! re: Pemu
ITDH
rubber products into pellets.
Alexander Nikolayevich
Make Sure Your PR & Marketing People See This tel: 36-1-118-0051 Kalin General Director
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Highlights Continued from Page 4 massive change, with plans to triple its 360 sets of 1500cc SOHC engines and
output of Golf models in 1998 up to medium-type transaxles that will equip
Umformtechnik Erfurt. 120,000 units. But even greater Lanos models produced by Daewoo in
expansion may lie ahead. Poland.
Skoda (unrelated to the Volkswagen-
owned Skoda-Auto) produces a wide VW Bratislava’s personnel director, Another 3,800 sets will leave for Poland
range of equipment and machinery for Jaroslav Holecek, who is responsible for later in June. Final homologation has
the transportation, nuclear power, and finding all of the new workers for VW’s been obtained for Daewoo’s SOHC
other industries. According to expansion plans, hinted at much bigger engines (single camshaft) and for the
preliminary figures, the company things to come during a May speech in medium-type transaxles.
suffered a CZK 1.78 billion ($54 million) Bratislava. After recounting VW’s
loss in 1997. turnover, investment, and employee Daewoo Heavy Industries Buying
figures for 1998, he added that “the Vehicle Manufacturer
Hungary figures for 1999 are several multiples of
the figures for 1998.” Daewoo announced that it is acquiring a
Suzuki & GM Cooperate on Small Car 51% stake in the company Mecatim.
Turnover for 1998 is expected to be SK Mecatim is a manufacturer of small cars,
General Motors Europe and Suzuki 53,980 million ($1.6 billion), up from tractors, and automotive components
Motor Corp. have agreed to jointly SK 21,916 million ($660 million) in based in Timisoara, Romania. Mecatim
develop a new vehicle in the small car 1997. Investment for 1998 is set at DM will reportedly supply parts to Daewoo’s
segment. “We plan to produce 50,000 173.6 million ($100 million), and by the assembly plant in Romania, as well as to
units of the new car,” said Tamas end of the year the company plans to other Daewoo plants.
Tihanyi, the PR & Marketing Manager have 4,650 workers, an increase of over
for Suzuki’s subsidiary in Hungary, 1,000 from last year. Slovenia
Magyar Suzuki. (for more on Magyar
Suzuki, see Profile on page 1) CV Maker TAZ Sipox Looks to New Cars Sales Drop In Slovenia
Germany for Business
RABA Engine Fitted With New At the end of April, new cars sales in
Natural Gas Vehicle System TAZ Sipox, Ltd., Trnava is looking to Slovenia totaled 23,302 units, down
export its light commercial vehicle to 2.6% from 23,927 units sold during the
Transcom International’s affiliated Germany. TAZ took part in the Amitec same period last year. Market leader
company, Transcom Engine ’98 exhibition in Leipzig, Germany in Renault saw its market share drop to
Corporation has developed an April to introduce the different versions 18.83% from over 20% a year earlier.
electronic fuel injection and engine of its van, which include an ambulance Renault’s sales totaled 4,387 vehicles.
control system for heavy duty vehicles. and hearse.
In May at the NGV’98 natural gas Second ranked Volkswagen’s sales were
vehicles conference and exposition held Final prices for the German market are off 2.5% at 2,887 units. VW controls
in Cologne, Germany, Transcom featured not yet set. Current prices begin at 12.39% of the market. Third ranked
an advanced turbocharged Renault $12,600. According to TAZ’s marketing Daewoo saw its sales jump over 140% to
MGDR:06.20.45 natural gas engine and manager Jaroslav Jurci, “the prices will 2,032 units. The Korean company’s
a RABA G10-TE190 natural gas engine be very attractive to the customer.” market share shot up from 3.51% to
fitted with the Transcom Natural Gas 8.72%.
Vehicle System (NGVS). Both engines, Last year, TAZ manufactured 831
one from Renault Vehicle Industries of vehicles in various versions. Some 48% The 5 best selling models in Slovenia
France, the other from RABA Motor were exported, including exports to the during the first four months of 1998 were
Company of Hungary, achieve the Czech Republic. The TAZ vehicles are the Renault Megane, Volkswagen Polo,
EURO III draft exhaust emission the former Skoda 1203 model, Renault Clio, Fiat Punto, and Opel
standard. production of which was moved from Corsa.
Mlada Boleslav, Czech Republic to
Transcom has invested over AUS $40 Slovakia prior to 1989. The version of South Central Europe
million (US $26 million) into its NGVS the van produced in Slovakia has a
and has tested the system in several Volkswagen-made 1.9 liter diesel Opel Top Seller In Croatia
countries. Transcom’s computer engine. TAZ intends to manufacture the
controlled fuel injection and engine van, at the latest, until the year 2000. During the first four months of 1998,
management system is currently in Opel was the top selling brand in
service in city buses in Perth and Romania Croatia. Sales of 2,693 cars gave the
Canberra, Australia, and Szeged, company a 13.8% market share. The
Hungary. Daewoo Sending Engines & Opel Corsa captured a 7% market share,
Transaxles to Poland and the Vectra also turned in strong sales.
Slovak Republic Sales of the new Astra in Croatia begin
On June 3, 1998, the first batch of on May 22, 1998 n
VW Bratislava Hints At Expansion engines and transaxles left Daewoo
Automobile Romania’s plant for
Volkswagen Bratislava is undergoing Poland. Three trucks were loaded with
“We regard the integration of major
5 Questions With Detlef Wittig, systems (e.g. seats, doors, etc.) suppliers
Vice Chairman & Chief Financial Officer as an important strength of our
production system because it has clear
of Skoda Auto logistical advantages and allows the
fastest possible flow of information
Can you give us an update on Skoda’s By now, our suppliers use the latest between car manufacturer and supplier to
supplier localization program? Are technology and deliver world class instantly solve any problems. So far, the
local suppliers able to meet the quality quality components not only to Skoda, system is very successful and we have
requirements for Skoda’s new models, but to other vehicle manufacturers within not faced any major difficulties.”
or will more supply contracts be and outside the Volkswagen Group. For
shifted to Western companies? 1997, they were awarded contracts from What’s an important marketing trend
VW, Audi, and Seat of a value of more in the Central European auto industry
“For Skoda-Auto it was always than DM 483 million ($268 million) per and how is Skoda-Auto contending
abundantly clear that the only way to year. As more and more Skoda suppliers with it?
prosper was to continue to be able to achieve the higher quality ratings, so too,
manufacture vehicles at favorable cost will their chances of being able to supply “Central Europe is a reemerging market
levels and therefore with its local into the VW Group increase.” in the world. Clearly, the levels of
suppliers, but only then when Skoda was income in Central Europe are still far
able to do this to the high Western What’s the biggest problem faced by behind Western standards. Therefore,
quality and technical standards. Today, local suppliers? car buyers are looking for high quality
our customers expect the highest quality and reliable products, as well as low
and service at a Skoda price. “After the fall of Communism, most prices and low service/maintenance
suppliers obviously lacked Western costs. Skoda provides that.”
Out of 767 Skoda suppliers, 279 are know-how and technology. Therefore, a
Czech and Slovak. Skoda currently fast knowledge transfer and strong Last time we spoke, you mentioned
sources nearly 75% by value of its Western partners were of critical that Skoda-Auto makes heavy use of
purchasing volume from these suppliers, importance. Skoda’s fast growth in the press to promote its vehicles. Is
and a further 25% from suppliers abroad. output helped the suppliers to quickly this still your primary source of
A major reason for this success was the recover their high initial investment marketing or have you adopted any
work of Skoda’s supplier development outlays and to strengthen their position in new strategies?
task force, as well as Skoda’s role as the European supply industry.”
facilitator for partnerships with Western “We have placed a strong focus on
suppliers. Skoda has been instrumental How are the on-site suppliers at the exposure marketing and have added TV
in the creation of 90 joint venture and new Octavia plant working out? Any spots to our media unit. But still we
greenfield agreements between Western unseen difficulties with this type of a have a major focus on PR activities to
and Czech/Slovak companies. supply arrangement? support our marketing unit.”
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Submit Your Nominations for the

1998 CEAR™ Central European Automotive Excellence Award
The CENTRAL EUROPE AUTOMOTIVE REPORT™ is accepting nominations for the 1998 CEAR™ Central European
Automotive Excellence Award. This award will be presented to the Central European automotive manufacturer or supplier that
has best demonstrated market leadership through its use of innovative manufacturing and marketing systems. The award is
given to recognize the positive influence such exemplary leadership has on the development of the Central European
automotive sector. We would greatly appreciate your input in nominating candidates for this award.
You may nominate your own company or others. The deadline for nominations is August 15, 1998.
1st Nominee Reasons
2nd Nominee Reasons
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Powertrain Continued from Page 5 Quality Continued from Page 11 disciplined approach to ensure the
effective resolution of internal and
Poland. • Purchasing/Subcontractor external supply problems by the
• Dacia — produces powertrain Management determination of root cause and
components for its Berlina, Break, • Product Identification & Traceability prevention of recurrence is clearly
and Nova models • Shipping demanded by QS-9000 and the Material
• Hyundai — Signed agreement with • Manufacturing Flexibility/Inventory Management System requirements. The
Dacia to produce 50,000 Hyundai Management steps in the disciplined approach are
Accent models and 100,000 engines • Inspection, Measuring, & Testing recommended as follows:
starting in 1999. Accents will be • Corrective & Preventive Action
sold in Romania and engines will be
• Handling, Storage, Packaging, • Management decision to use Team-
used in Dacia models later in 1998.
Preservation, & Delivery Oriented Problem Solving approach
• Roman — truckmaker produces
crankshafts and camshafts n • Control of Material Records • Form a team and use team approach
• Internal Material Audits • Define the problem and plan to take
• Training action
• Statistical Techniques • Implement and verify interim
containment action(s)
Team-Oriented Problem Solving using a • Find, define, and verify root cause(s)
• Select and verify solution(s) to
ensure permanent corrective actions
Fund Continued from Page 13
• Implement permanent corrective
There are loads of things we’ve got up our actions
sleeve that we can’t discuss at the • Prevent recurrence of this and
So we’ve got to move into the moment. It’s all very exciting. It’s similar failures, also identify any
aftermarket. And we’re doing that by a commercially sensitive information and if company improvement
coordinated strategy of developing a we let out too soon, we may lose some of opportunities.
distribution structure and converting the our initiative n • Recognize individual contributions
product alignments. You can’t do this and congratulate the team
overnight. It takes time. But the product
lines must move into the aftermarket. Next Month: What the Sub-contractor
That’s really where we want to be. Supply Base Expects of Their Customers
Exhibitions, Conferences, and Shows in 1998 & 1999

1998 Nov. 26-Dec. 6 Montevideo, Uruguay Montevideo Motor Show
August 26-30 Moscow, Russia Moscow Int’l Motor Show Nov. 27-Dec. 6 Essen, Germany Essen Motor Show
Sept. 3-10 Hanover, Germany Auto Show Nov. 30-Dec. 2 Graz, Austria SAE Total Life Cycle Conference &
Sept. 14-16 Nagaya, Japan Int’l Symposium on Advanced Vehicle Exposition
Controls Dec. 2-5 Jakarta, Indonesia Indonesia Auto Show
Sept. 15-20 Nitra, Slovakia Autosalon Nitra Dec. Detroit, MI SAE Global Vehicle Development
Sept. 15-20 Frankfurt, Germany Automechanika Conference
Sept. 18-27 Bucharest, Romania Bucharest Motor Show 1999
Sept. 27-Oct. 1 Paris, France FISITA World Congress Jan. 16-24 Brussels, Belgium Brussels Int’l Motor Show
Sept. 29-Oct. 1 Detroit, MI Int’l Body Engineering Conference Feb. 4-14 Amsterdam, The Netherlands Int’l Motor Show
Sept. 29-Oct. 4 Budapest, Hungary Autotechnika March 11-21 Geneva, Switzerland Geneva Int’l Motor Show
Oct. 1-3 Brussels, Belgium Int’l Electric Vehicle Symposium March 26-Apr. 4 Belgrade, Yugoslavia Belgrade Motor Show
Oct. 1-11 Paris, France Int’l Road Transport Exhibition April 8-16 Stockholm, Sweden Stockholm Int’l Motor Show
Oct. 1-11 Paris, France Int’l Paris Motor Show April 11-17 Zagreb, Croatia Zagreb Motor Show
Oct. 6-8 Detroit, MI Global Powertrain Congress April 13-18 Riga, Latvia Riga Motor Show
Oct. 8-12 Ho Chi Minh City, Vietnam Auto Vietnam 98 May 22-30 Barcelona, Spain Barcelona Int’l Motor Show
Oct. 12-13 Warsaw, Poland IBC UK Automobiles in Eastern May 27-June 1 Poznan, Poland Int’l Automotive Show
Europe Conference June 5-10 Brno, Czech Republic Brno Motor Show
Oct. 13-15 Amsterdam, The Netherlands InterAuto ’98 June 18-26 Sofia, Bulgaria Sofia Motor Show
Oct. 16-25 Sydney, Australia Int’l Motor Show August 24-29 Moscow, Russia Moscow Motor Show
Oct. 16-25 Panama City, Panama Panama Auto Expo Sept. 30-Oct. 10 Bucharest, Romania Bucharest Motor Show
Oct. 23-Nov. 1 Birmingham, UK British Int’l Motor Show Nov. 9-11 Birmingham, UK Autotech ‘99
Oct. 29-Nov. 1 Istanbul, Turkey Commercial Vehicles ’98 Nov. 13-21 Athens, Greece Athens Int’l Motor Show
Oct. 29-Nov. 8 Sao Paulo, Brazil Brazil Int’l Automobile Trade Show
Nov. 4-7 Bangkok, Thailand Asia Automotive ’98
Nov. 4-8 St. Petersburg, Russia St. Petersburg Auto & Service
Show
Nov. 5-8 Istanbul, Turkey Auto Show Visit Trade Events under the Expert Directories at http://www.cear.com
Nov. 12-15 Cairo, Egypt, Cairo Motor Show For more information, please contact the CEAR™.
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CEAR™ Romanian Automotive Distributors
Auto Italia Civati Trading Hyundai Auto Porsche Romania
Fiat cars and LCVs Industries Romania Volkswagen, Audi,
Herbert Stein Toyota cars and LCVs Hyundai cars and Skoda cars and LCVs
Managing Director M. Ionescu Muscel LCVs Franz Fruhwirth
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Chrysler Saves $20 Million Per Assembly manufacturing facilities across the
organization to operate on standardized
Plant With Virtual Manufacturing System and optimized control code.
New Product Review
“A key feature is the creation of a
centralized and consistent database of
B
uilders and operators of end-to-end product and process
process knowledge that our engineers
assembly plants in Central management system which enables
will tap into,” said Dan Vandenbossche,
Europe take note. Chrysler Chrysler to design, construct, and run a
manager of Chrysler’s Manufacturing
Corporation appears to have found a “virtual manufacturing process.”
Technical Support.
better way to build a car assembly plant.
C.P.G.A. further develops machine logic
“This capture of best practices across all
Chrysler, in partnership with Rockwell digitally within the system — thereby
of our manufacturing facilities will
Automation, Dassault Systemes, eliminating the end-line programming
improve the knowledge base of plant
Deneb, and Progressive Tool & needs — so workcell control logic is
personnel and process and tool design
Industries, announced in May 1998 defined much earlier and automatically.
engineers, and benefit future product
that they have jointly developed a next- Controls engineers can then concentrate
launches.”
generation digital manufacturing system on other value-added areas of the
that will save millions of dollars and manufacturing process rather than
The validation of control code in a virtual
shave months in the development time manual programming tasks.
world rather than on the plant floor will
of passenger vehicles.
greatly reduce workcell verification, thus
In addition, C.P.G.A. is an integral part
shortening the launch time of
Chrysler’s system, Control Program of the CATIA computer aided design
manufacturing facilities. The generated
Generation and Analysis (C.P.G.A.), system which Chrysler first used in
diagnostic rules and graphical
replaces the lengthy programming of 1984. CATIA 3D models have replaced
representation of fault locations will also
control code to operate each workcell engineering drawings and allows for an
improve machine operating cycles once a
on the plant floor, thus shortening the integrated design. This allows designers
plant is launched.
launch time of manufacturing facilities. from different disciplines to better
understand how their parts relate to
The effort to develop computer generated
“The C.P.G.A. technology will reduce other parts during the design of the
programmable codes began between
the time it takes to program a typical vehicle.
Chrysler and Dassault Systemes, Deneb,
workcell by thousands of hours, shave
Rockwell Automation, and PICO in mid-
two to four months off the development “The generation of control code is the
1996. C.P.G.A. will be moving from the
time of passenger vehicles, and save last step in integrating all the virtual
development stages into production
upwards of $20 million per assembly manufacturing advances we’ve made
applications over the next 12 to 24
plant,” said Chrysler’s Frank into one system and allows for seamless
months n
Ewasyshyn, vice president of Advance communication to workcells on the plant
Manufacturing Engineering. floor,” said Ewasyshyn. “It also
provides for the automatic generation of
“The system will also more readily
identify and eliminate process variation
diagnostics and the verification of
control code prior to the construction of FUTURE
in the build process for better vehicle any tooling. By stretching the
quality, and improve communication
among manufacturing, engineering, and
supplier personnel.”
imagination, we’ve taken the virtual
world almost to its limits.” ISSUES
C.P.G.A. captures product, process, and
The new system provides an integrated resource models in a common CAD
environment for tool process, vehicle environment, which allows the data to • Auto Plastics Review
design, and the automated generation of be shared among all stages of vehicle • Interview With Dana’s Perfect Circle
plant equipment diagnostics and control development. Control code and • More Supplier Lists
code. In addition, the system allows the diagnostics are then generated from the • Czech Republic Tax & Customs
sharing of process information for the given sequence of operations defined in Update
generation and validation of control the particular process model along with • Poland Sales and Production
programs prior to tooling construction the tooling elements in the design Statistics
in a vehicle program. model. • Quality Improvement Lesson 5
• Bulgarian Sales & Production
C.P.G.A. builds upon the Digital An important element is that the system Review
Manufacturing Process System enables Chrysler engineers to program • Lucas Takes On The Czech Republic
(DMAPS), which Chrysler introduced its manufacturing processes consistently, • Measure Your Company’s
with Dassault Systemes in 1995. thereby reducing and even eliminating Intellectual Capital
DMAPS is now a fully computerized programming errors. This allows all
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the evening can be processed and used
Audi Assembling Engines & Autos in Hungary the next morning in Gyor. After the
Company Spotlight components are machined and
assembled, the completed engines are
shipped back to Ingolstadt by rail.
Company: Audi Hungaria Motor Kft
Location: Gyor, Hungary Back in 1994, some 200 workers helped “We have two trains for the engine plant
Contact: Peter Lore, Public Relations produce 750 four-cylinder, five-valve and we will have 2 trains for the car
Business: Engines, Car Assembly engines a day. Today, 2,600 unionized assembly operation by the end of this
employees churn out 2,500 4-cylinder, year,” said Mr. Lore.
Audi is obviously pleased with its 1,000 V6, and 100 V8 engines a day.
decision to build engines in northwestern The engine plant runs 3 shifts a day, 7 Engines built in Gyor are used in Audi,
Hungary. The engine plant, producing days a week. Volkswagen, Skoda, and Seat cars.
since August 1994, is now the
company’s most important engine Since April, TT Coupes have been added The Workers
building facility. By the year 2000, Audi to the factory’s menu, and production of
expects to produce 4,000 engines a day. TT Roadsters will soon follow. Total car As in most of today’s lean
And in April 1998, Audi expanded its assembly capacity is 30,000 units — manufacturing operations, the
operations in Hungary with the start of 10,000 TT Roadsters and 20,000 Coupes. hierarchical structure at the Audi engine
assembly of the TT Coupe model. “This year we are planning to produce plant is flat and decision making is
about 10,000 units, just Coupes,” said decentralized. Workers are organized
Audi’s car and engine factory is located Mr. Lore. into teams and are empowered to make
in the city of Gyor, halfway between their own decisions. Performance
Budapest and Vienna. When searching The car assembly plant currently operates targets and procedures are set jointly by
for a suitable site for its new plant, Audi with one shift and employs 360 workers. the workers and management. Inside
looked at 180 locations throughout “By November, we will have 3 shifts,” the factory, target and current
Europe and chose Gyor. Audi said Mr. Lore. production levels are displayed on
Hungaria Motor Kft. was founded in panels where all workers can see them.
February of 1993 as a fully-owned By the year 2000, employment in Gyor
subsidiary of Audi AG. will hit 3,000 workers, with Audi’s total There are two reporting levels at the
investment topping DM 841 million factory between the plant management
The Plant ($480 million). and production teams — the Product
Manager and Area Manager. There is
The plant is located in a customs free Logistics only one reporting level in
zone on a 480,000 sq. meters site. The administration.
engine building takes up 110,000 sq. In 1996, shipments of materials and
meters of this area, and within the engine engines between Hungary and Ingolstadt, Worker pay at the engine factory is
building, car assembly operations cover Germany were switched from road to rail. based on a standardized, performance-
35,000 sq. meters of space. Components and blanks destined for the based remuneration system which
Gyor engine plant are batched in includes a basic wage and a variable
According to Peter Lore, Audi Ingolstadt and transferred to Gyor component tied to individual
Hungaria’s spokesman, there are “no overnight by rail. performance n
concrete plans” for the remaining unused
space at the facility in Gyor. Thus, components leaving Ingolstadt in
Sales of New Cars and Commercial Vehicles in Poland
Sales (Units) YTD April

1992 1993 1994 1995 1996 1997 1998 % Change vs ‘97
————— Passenger Cars —————
Local Production 144,748 170,549 199,724 206,284 260,265 337,467 100,229 24.62%
Import 54,531 71,059 50,558 58,754 114,347 140,493 37,296 -25.72%
Total 199,279 241,608 250,282 265,038 374,612 477,960 137,525 5.27%
————— Commercial Vehicles —————
Local Production 19,665 18,475 21,413 28,076 43,207 43,086 9,988 -11.23%
Import 3,250 5,497 2,542 3,870 7,586 12,217 2,378 25.09%
Total 22,915 23,972 23,955 31,946 50,793 55,303 12,366 -5.98%
Source: SAMAR, s.c.
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CEAR™ Extra Data For Email Edition
This Data did not fit in the Print Edition, but it is made available to Email Subscribers
Best Selling Brands in Poland (YTD April 1998)

Ranking By Retail Volume
Passenger Cars Commercial Vehicles
Make Volume Market Share Make Volume Market Share

FIAT 44,223 32.16% DAEWOO MTR. 3,121 25.24%
DAEWOO 38,126 27.72% DAEWOO 2,662 21.53%
GM - OPEL 10,558 7.68% CITROEN 1,252 10.12%
SKODA 6,658 4.84% MERCEDES 1,011 8.18%
RENAULT 5,344 3.89% VW 807 6.53%
FORD 5,134 3.73% FIAT 696 5.63%
VW 4,339 3.16% SKODA 672 5.43%
TOYOTA 4,308 3.13% FORD 448 3.62%
HONDA 4,284 3.12% PEUGEOT 428 3.46%
SEAT 3,394 2.47% IVECO 332 2.68%
Source: SAMAR, s.c.
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Romanian New Vehicle Sales (1st Q)
Romanian New Vehicle Sales (in units)

1998 1st Q 1997 1st Q % Change
Passenger Cars 27,083 23,991 12.88%
Light Commercial Vehicles 6,106 4,043 51.02%
Commercial Vehicles (3.5-7 ton) 251 141 78.01%
Commercial Vehicles (over 7 ton) 403 216 86.57%
Buses 143 201 -28.85%
Up to 15 places 54 58 -6.89%
Over 15 places 89 143 -37.76%
TOTAL 33,986 28,726 18.31%
Source: APIA
CEAR™ Extra Data For Email Edition
This Data did not fit in the Print Edition, but it is made available to Email Subscribers
New Car Registrations Growth in Europe (YTD April) Place Your

Internet/Print Ad Here.
Country 1998 1997 % Change
1 Germany** 971,900 869,320 11.8 This could be a direct link
2 Italy** 716,500 617,672 16.0
3 U.K. 622,600 550,486 13.1 to your
4 France 460,200 406,897 13.1 email address,
5 Spain** 272,000 239,016 13.8 web site,
6 Netherlands** 167,800 159,052 5.5
7 Poland* 137,525 130,635 5.3 and
8 Belgium 136,500 122,862 11.1 new business.
9 Austria** 80,000 75,472 6.0
10 Switzerland** 69,100 68,688 0.6
11 Portugal** 58,800 55,577 5.8 Your ad appears in the
12 Sweden 58,300 51,411 13.4 Print Edition,
13 Ireland** 56,400 51,180 10.2 Email Edition
14 Greece** 44,900 41,005 9.5
15 Denmark** 40,400 39,300 2.8 and on
16 Finland 34,200 30,292 12.9 CEAR.COM ™
17 Norway 27,000 29,703 -9.1
18 Luxembourg 9,900 9,602 3.1
It’s as easy as a
*Grey import not included mouse click.
** Provisional figures
sales@cear.com
Source: SAMAR, s.c.
Best Selling Models in Poland (YTD April 1998)
Passenger Cars Light Commercial Vehicles Medium Commercial Vehicles
Make Units % Change Make Units % Change Make Units % Change

’98 v ’97 ’98 v ’97 ’98 v ‘97
Daewoo Tico 13,171 89.37 FSO Polonez Truck 2,585 -18.69 Daewoo Lublin 2,675 1.06
PF 126 11,136 -19.09 Citroen C15 712 -23.61 Mercedes Vito 804 118.48
Daewoo Lanos 10,380 - Skoda Pick up 672 111.99 VW Transporter 559 115.00
Fiat Cinquecento 9,902 -35.22 Citroen Berlingo 417 13800.00 FSC - Zuk 446 -49.38
Fiat Siena 9,681 - Fiat Uno Van 414 -18.34 Ford Transit 370 -35.76
Opel Astra 6,198 32.86 GM - Opel Combo 220 -19.12 Iveco Daily 332 114.19
FSO - Polonez 5,938 -51.40 Peugeot Partner 166 -25.23 Mercedes Sprinter 207 100.97
Skoda Felicia 5,723 21.15 Fiat Cinquecento Van 125 -89.80 Peugeot Boxer 206 171.05
Fiat Punto 4,638 0.41 VW Caddy 83 -44.83 Kia Ceres 163 94.05
Fiat Uno 4,474 -32.16 FSO Polonez Cargo 77 -25.96 Fiat Ducato 157 -48.86
Source: SAMAR, s.c.

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POLAND ROMANIA RUSSIA SLOVAK REPUBLIC SLOVENIA

EUROPE The Source For Automotive Information On Central Europe™

AUTOMOTIVE July 1998

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Volume III, Issue 7 ISSN 1088-1123

Regional Market Poland Profile

Issue Feature Automotive Reviews Special Reports Close Date

Feb 99 Hungary Central Europe’s Vehicle Fleets Jan 10, 1999

Apr 99 Slovak Republic Marketing & Advertising na Mar 10, 1999

May 99 Romania/Bulgaria Electronics Auto Consultants Apr 10, 1999

Jul 98 Hungary Powertrain Exporting to Jun 10, 1998

Aug 98 Not Published

Sep 98 Czech Republic Plastics Auto Engineering Aug 10, 1998

Oct 98 Slovak Republic Logistics Human Resources Sep 10, 1998

Nov 98 Romania/Bulgaria Interiors Real Estate Oct 10, 1998

Dec 98 Poland/Slovenia Financing na Nov 10, 1998

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Polish Vehicle Market Segmentation (YTD April 1998)

Source: SAMAR s.c., Local Manufacturers and Official Importers, ACEA

Fastest Sales Climbers in Poland (YTD April 1998)

Passenger Cars Light Commercial Vehicles Medium Commercial Vehicles

Source: SAMAR, s.c.

Regional Distribution of Cars in Slovakia

Slovakia’s Car Density (1997)

Car Density p/1,000 pop. Car Density p/sq. km Car Park

Industry Part II It is interesting and informative to read

We have the best and largest sales

Romanian Car Exports (1st Q)

Romanian Car Exports (in units)

Company Model 1998 1st Q 1997 1st Q % Change

TOTAL 1,672 996 67.87%

Russia Continued from Page 14

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Sales of New Cars and Commercial Vehicles in Poland

Sales (Units) YTD April

Source: SAMAR, s.c.

Best Selling Brands in Poland (YTD April 1998)

Passenger Cars Commercial Vehicles

Make Volume Market Share Make Volume Market Share

Source: SAMAR, s.c.

Place Your Internet/Print Ad Here.

Romanian New Vehicle Sales (1st Q)

Romanian New Vehicle Sales (in units)

New Car Registrations Growth in Europe (YTD April) Place Your

Best Selling Models in Poland (YTD April 1998)

Passenger Cars Light Commercial Vehicles Medium Commercial Vehicles

Make Units % Change Make Units % Change Make Units % Change

Source: SAMAR, s.c.

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