Audi news - Hungary

[Jim Griffin <JGriff@pobox.com>]

Just a tidbit of Audi news to chew on (low calorie, low fat... especially
good after the holiday...)

	  				 
	 GYOR, Hungary, Nov 27 (Reuter) - Volkswagen <VOWG.F> is  
blazing a new path in former communist eastern Europe by having 
its Audi AG division build a premium model in Hungary from 
mid-1998. 
	 ``It's easy to buy the best machines and technology to build  
a car, but it's not always easy to retrain workers with old 
habits,'' said Karl Huebser, managing director of Audi Hungaria 
Motor Kft (AHM), the Audi subsidiary in Gyor, western Hungary, 
where the TT convertibles and coupes will be built. 
	 ``However, in Hungary, we have a green field site that is  
building new products,'' Huebser said during a tour of AHM for 
journalists. 
	 ``And the workers are flexible, so it's really a great chance  
to make this car here in one of the most modern plants in the 
world.'' 
	 Since the Berlin Wall fell in 1989, automakers have poured  
more than $6.0 billion into the region, but most of the 
investments have been geared to building micro-to-medium-sized 
cars that are affordable, practical and not very glamourous. 
	 In sharp contrast, Audi has chosen the region to assemble  
the TT, a recently unveiled sports car aimed at devotees of 
conspicuous consumption. It will compete with two other flashy 
roadsters from Germany -- the SLK from Mercedes-Benz AG <DAIG.F> 
and the Z3 from BMW AG <BMWG.F>. 
	 FIRST MODEL PRODUCED OUTSIDE GERMANY   	

	 The TT is the first model that Audi will launch into  
production outside Germany, but the company said the 
opportunities outweigh the risks in assembling a high-profile 
car in a developing country like Hungary. 
	 AHM will only assemble the TT, and most of the planned  
output of 30,000 units a year will be exported to the United 
States and western Europe, but the venture raises the profile of 
AHM, an engine manufacturer that plans to invest roughly 1.0 
billion marks by 1999. 
	 GYOR PLANT A HIGH-TECH SHOWCASE   	

	 The plant itself is a striking showcase for Audi, as the  
facilities and equipment look and sound nothing like a complex 
of intensive industrial production. 
	 Machine operators, dressed neatly in bright red overalls,  
perform high-tech tasks in an atmosphere of orderliness and 
tranquility. 
	 The only obvious signs of wear and tear from the plant's two  
years of operations are tread marks on the still-white floor 
from bicycles that workers ride between tasks across the vast 
50,000 square metre (538,200 square feet) production hall. 
	 ``If there are any major noises, that means there is a  
problem,'' Huebser said. 
	 Most important, analysts said, plans to assemble the TT in  
Hungary point to VW's drive to replicate in central and eastern 
Europe its position as the top-selling brand in western Europe. 
	 ``VW has been the most aggressive of western European  
automakers in pursuing opportunities in the old East Bloc, and 
it now has a formidable manufacturing presence in the region,'' 
one analyst said. 
	 ``The TT project in Hungary is a colourful way for VW to say,  
`We're dead serious about this part of Europe, too.' And VW may 
be trying to show that it has a variety of ammunition to fire in 
the battle for market share with Korean automakers marching into 
the region.'' 
	 VW LEADS IN EAST EUROPE VENTURES   	

	 Since 1991, VW has bought, built or licensed plants in the  
Czech Republic, Poland, Russia and Slovakia. It is considering 
similar ventures in Belarus and Macedonia. 
	 In contrast, Adam Opel AG is the only other automaker based  
in western Europe now building cars in more than one country in 
central and eastern Europe, and it is owned by U.S. giant 
General Motors Corp <GM.N>. 
	 Meanwhile, Korean conglomerate Daewoo Group 1/8DWGR.CN3/8 has  
started building vehicles in the Czech Republic, Poland, 
Romania, Russia and Uzbekistan. Hyundai Group 1/8HYGR.CN3/8 
<67510.KS> and Kia Motors Corp <67500.KS> have been planning 
vehicle production in Poland and the former Soviet Union. 
	 ``Many automakers from western Europe have viewed eastern  
Europe as their backyard,'' said Nigel Griffiths, an auto analyst 
with DRI/McGraw-Hill in London. ``But they are running some risk 
of losing market share by staying on the sidelines while the 
Korean automakers continue to penetrate the region.'' 
	 VW has been acutely aware of Asian competitors offering  
low-cost cars, as its per-car profits are among the lowest in 
the global auto industry, partly because Germans rank as the 
world's highest-paid workers. 
	 VW has sought to boost its competitiveness and efficiency  
through investments in central and eastern Europe, and AHM will 
play an increasingly important role, analysts said. 
	 ATTRACTIONS OF HUNGARY   	

	 AHM, which began building four-cylinder engines in 1994,  
plans to start producing V6 engines in early 1997, and it will 
assemble and partly manufacture all Audi engines by mid-1998, 
Audi spokesman Jurgen DeGraeve told Reuters. 
	 ``Hungary offers us the flexibility to work continuously --  
three shifts, 24 hours a day, seven days a week,'' DeGraeve said. 
``It is difficult for manfacturers to do this in Germany.'' 
	 AHM-built engines eventually will fit models from each VW  
brand, including Octavias of Czech automaker Skoda automobilova 
AS, which is owned 70 percent by VW. 
	 The Hungarian company also might build a new diesel engine,  
but Audi officials declined to comment on the details. They are 
reluctant to discuss AHM's growing role in the VW group because 
of mounting concerns in Germany about domestic companies moving 
production to foreign markets to reduce costs. 
	 ``Audi still is the most German of the German automakers,''  
DeGraeve said. ``Our objective is to produce as much as possible 
in Germany and as much as necessary abroad.'' 
	 Though Skoda represents VW's biggest investment in former  
communist Europe, Audi chose Hungary over the Czech Republic for 
the engine plant that now is AHM, DeGraeve said. 
	 ``The Czechs and the Hungarians are now at the same wage  
level, but the Audi engine plant in Hungary has the flexibility 
that simply is not possible in the Czech Republic,'' he said. 
	 But the inflexibility of some Hungarian authorities has  
diluted AHM's gains in savings and efficiency, Audi officials 
said. 
	 Despite the problems, Huebser said AHM has been successful,  
earning profits of 30 million marks ($19.8 million) last year. 
He said returns would be ``significantly better'' in 1996, when 
engine production is expected to rise to 216,000 units from 
106,000 units in 1995.

                             Jim Griffin
                      JGriff@pobox.com
                        Maryland, USA
"Perception is often stronger than reality!"
                               '92 100S
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