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Toyota, PSA Christen JV Plant

 By Peter Homola

WardsAuto.com, Jun 3 2005

The new plant is expected to produce about 300,000 vehicles next year.

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VIENNA – Toyota Motor Corp. and PSA Peugeot Citroen officially cut the ribbon on their new joint venture plant, Toyota Peugeot Citroen Automobile Czech s.r.o. (TPCA), in Kolin, Czech Republic.

Serial production of the Toyota Aygo, Peugeot 107 and Citroen C1 small cars was launched at the end of February, and output so far totals 11,000 cars.

About €1.3 billion ($1.6 billion) was invested in the facility and development of the vehicles, about €200 million ($244 million) less than originally expected. Still, the project is the largest single greenfield investment in the Czech Republic since the end of communism.

TPCA Plant

While the construction phase of the project cost less than planned, the JV has had to pay higher salaries than originally budgeted to lure workers. (See related story: Toyota-PSA JV: Lower Investment, Higher Wages Expected)

The TPCA plant covers 306 acres (124 ha) located in the Kolin-Ovcary industrial zone 37 miles (60 km) east of Prague. The plant operates on a 2-shift/3-team basis. Production was launched with one team. The second team will start working this month and the third team will be added in October.

Currently, about 350 cars are manufactured in Kolin each day.

"That will rise to 1,050 once full capacity is reached by next January," says TPCA Vice President Jean-Pierre Chantossel.

The 2005 plan calls for output of 100,465 cars. Production will increase gradually, and full capacity levels will be reached early next year.

"We want to reach full capacity at the beginning of 2006," says TPCA President Masatake Enomoto.

TPCA is expected to produce about 300,000 units next year.

The new facility currently employs 2,400 people, but that will increase to 3,000 in 2006 once capacity is reached.

Toyota and PSA have been promised significant incentives by the Czech government, including a full corporate income tax break for a maximum of 10 years and financial support for worker training, as well as transfer of developed real estate at a favorable price.

However, not everything is meeting Toyota and PSA’s expectations. TPCA is unhappy with the Czech government's failure to provide promised housing for plant workers. The government was to supply 850 new apartments for workers by mid-2005, but so far Kolin has been allocated only 136 flats.

About 50 to 60 people quit their jobs every month, largely because they don’t have suitable accommodations, Chantossel says.

TPCA plans to discuss the housing situation with Czech Prime Minister Jiri Paroubek.

“For us, this is a real problem," Chantossel says.

The first Kolin-made cars will reach European dealers this week. Despite the fact the cars are manufactured in the Czech Republic, most of them will be sold in Western Europe. For a typical buyer in the Czech Republic or other East European countries, TPCA’s cars are too small and expensive.

The price of the base Citroen C1 and Peugeot 107 will start at the equivalent of  $9,621 in the Czech Republic, while the least expensive Toyota Aygo will be priced at $10,555.

By contrast, the lowest-priced Dacia Logan costs $8,042, while the basic version of the Skoda Fabia starts at $9,048. Both the Logan and Fabia are larger than the trio from Kolin.

As a result, Automobiles Peugeot expects to sell only about 900 Peugeot 107s in the Czech Republic this year. Automobiles Citroen forecasts 350 to 400 C1 sales, while Toyota targets delivery of 350 Aygos.

Eastern Europe is a growing market for cars of this size, but initially the largest volumes will be sold in Western Europe, notes Vincent Besson, director-product and markets for Citroen. “The main markets for the C1 are France, Italy and Spain,” he says.



© 2005, Primedia Business Magazines and Media, a PRIMEDIA company. All rights reserved. This article is protected by United States copyright and other intellectual property laws and may not be reproduced, rewritten, distributed, redisseminated, transmitted, displayed, published or broadcast, directly or indirectly, in any medium without the prior written permission of PRIMEDIA Business Corp.

 
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