In Romania, people are cheaper than robots.Which explains why western European car makers are scrambling to open factories here and in other parts of eastern Europe, away from costly labour and rigid rules at home.
While most companies insist they are simply chasing new markets rather than shifting production away from existing sites, analysts say the demise of large-scale car manufacturing in western Europe is inevitable.
"Who on earth would want to manufacture anything in western Europe? Who would want to employ anyone here?" said Credit Suisse First Boston autos analyst Harald Hendrikse.
Car firms boast about steps to conquer the booming Chinese and Indian markets, but some analysts say eastern Europe could pose a bigger threat to western jobs since they could render home-grown factories redundant. Eager to penetrate eastern European markets ripe for growth, Renault bought the loss-making Romanian brand Dacia in 1999 and hauled it to the cusp of profit.
With rock-bottom labour costs at its factory in Mioveni, southern Romania, where the average worker makes €150 a month, people are used for tasks that in a western factory would be done by expensive robots.
Low capital expenditure at Mioveni means Renault has been able to price its newest car from €5,000. That makes it a feasible choice in emerging markets.
Renault's domestic rival PSA Peugeot Citroën is also moving east, building a plant in Slovakia and a joint factory with Japan's Toyota in the Czech Republic.
Asian manufacturers are increasingly opting for eastern Europe for their European bases. Slovakia, which also boasts a Volkswagen plant, is set to become the world's number one car maker per capita when Hyundai opens a plant there in 2006.
For now, Renault executives insist the Mioveni plant has been revamped to meet extra demand, not to replace more expensive factories or capacity in France or Spain. But if Renault can really make a profit on the €5,000 car it may find it hard to justify making new models in the west. However, analysts note that industrial logic is not the only determinant. Politics and brand image come into play too, making a wholesale eastward shift in production more difficult.
Laying off staff is an arduous process in countries like France and Italy, and governments struggling to cut high unemployment rates would frown on factory closures.
- Reuters