Eastern German car industry in overdrive

29th April 2004, Comments 0 comments

Germany's former communist half has been receiving some bad publicity lately with mounting evidence of the enormous difficulties involved in trying to revamp the region. Clive Freeman reports on one eastern German success story - the car industry.

Finishing off a new Porsche in Leipzig

To the north of Leipzig, the outlines of the new BMW automotive plant emerge on Europe's largest building site. When completed early in 2005, the gleaming factory complex will provide jobs for more than 5,500 in eastern Germany.
Some 650 automobiles of BMW's new "model three" series will be produced daily at the Leipzig works once it's fully operational.
A few miles distant, on a 200-hectare country site, is Porsche's dazzling new base in the east. Opened in August 2002 near Leipzig, its cluster of buildings is crowned by a distinctive 33-metre-high diamond-shaped (customer-centre) tower.
The sprawling complex - complete with test track - serves as a central production base for Porsche's Cayenne car, conceived in the late 1990s.
Martin Gillo, Saxony's Economics and Labour minister, who has dual German-US citizenship after a 20 year period working for American Micro Devices (AMD) in Sunnyvale, California, says Volkswagen, Porsche and now BMW's investment in the east is giving "Autoland Saxony" a major boost.
Most of VW's Golf, Polo and Passat cars exported to Japan, the United States and other foreign countries are produced in Saxony, he points out. Volkswagen has plants in Mosel and Chemnitz. Now, the luxury Phaeton car is made at its new "transparent factory" in Dresden.
Porsche began manufacture at its new plant in August last year. Now it gears for the launch of its new "super sports model" - the Carrera GT. BMW's production kick-off will occur early in 2005.

50 percent of Porsche's cars are sold in the US

""We are so good that the best of the best now want to manufacture here," says Gillo. On a coach ferrying journalists to the east's car production plants, he speaks of the State's determination to "further develop" Saxony's automotive industry.
"We are convinced that the new 'Middle Europe' area, which includes Saxony, southern Poland, the Czech Republic, Slovakia and part of Hungary, will become the new automotive growth region in Europe," he told Deutsche Presse-Agentur, dpa.
The ten new countries joining the EU means there will be a lot of opportunity for automotive construction and revenue. We are right in the heart of this region and ideally placed to take advantage of it," says Gillo who, after a spell as a microchip maker in Geneva in 1997, arrived in Dresden in 1999.
A year later he was appointed Saxony's Minister for Economic Affairs and Labour.
In Leipzig, Klaus Zellmer, Porsche's director of distribution and marketing, reveals that around 50 percent of its cars are sold in the US. "It's our most important market for the Cayenne and the Boxster," he says.
"We aim to be the best in the super sports car segment. Our new Carrera GT model has been inspired by our racing department. It's a car you can use on normal roads, but actually it's all racing technology. The 612 horsepower engine goes from zero to 124 miles an hour in less than ten seconds," he says.
Zellmer says quality makes Porsche cars popular. "They are powerful and long lasting. It's something in the luxury segment that people love associating with. Some get satisfaction from art or sailing boats, some from fast cars," he chuckles.
Last year Saxony suffered enormously from the "flood of the century." But Gillo says people performed wonders in rebuilding their businesses and damaged homes. Still, high unemployment persists - 20 percent presently - and Gillo warns it will be years before the per capita growth national product in the east nears that of the west.
"We are at about 65 percent now. At unification we were at 30 percent. The automotive industry helps make up the difference, but obviously a number of other areas of industry have a long way to go before they get to 100 percent," he says.
Nowadays, Saxony's chief source of foreign investment comes from the USA. 73 firms US-run companies employ some 10,000 workers in the eastern German state, most of them linked to the "car supplier" network.

Last year Saxony's exports to the US reached USD 2.9 billion (EUR 2.4 billion) - mostly cars, electronic equipment, printing machines and chemicals.
Brian Wade, the vice president of Linamar, a Canadian-based firm specialising in cam-shaft technology, says a recent contract won in Germany has led to a new big investment in a new plant in Crimmitschau, south of Leipzig.
Praising "unbureaucratic assistance" by officials in Saxony, Wade says Linamar now plans a product development plant in the town, as well as a sales base in Germany, "covering the whole of Europe."
Japanese automobile suppliers are also active in Saxony. Takata- Petri, which makes airbag and seat belt systems, built a plant in Elterlein in the Erzgebirge (Ore Mountain) in the mid-1990s. It now employs 450.
"We're doing very well and have no problems," says Knut Angres, from the Black Forest, who is the plant's manager. "Elterlein has proved a good investment."

April 2004



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