A Manufacturing & Assembly Powerhouse

• Average labor cost: EUR 775/month
• Unemployment rate: 11.1%
• Skilled labor coming from vocational schools.
• Slovakia – the new Detroit
• If they can assemble the Porsche they can do pretty much anything needed.

Slovakia is a global leader in cars produced per capita. Based on the previous success of Volkswagen (VW), PSA Peugeot-Citroen opened up its facility in Trnava, Slovakia with a capacity of 300,000 vehicles a year. Kia followed shortly, investing EUR 1 billion and opening its most modern auto manufacturing plant in Europe in 2006 with a capacity for another 300,000 cars per year.

The quality of the labor force is great. VW Slovakia has created and is still the only plant that produces the Touareg – an SUV for the demanding U.S. market. It is also the only plant that assembles the Audi Q7. Dr. Jochem Heizmann, AUDI AG Member of the Board of Management for Production, explained: “Bratislava likewise comes up to Audi’s extremely high standards. So the Q7 merits the description ‘Made by Audi’ in every respect.” Perhaps an even stronger argument for the top quality level attained by Slovak labor is that VW group assembles its luxury Porche Cayenne vehicle in the same plant at the outskirts of Bratislava. The production of a less sophisticated and cheaper car, the VW Polo, was discontinued there and moved out to Spain.

PSA Peugeot-Citroen and Kia are still in the process of rolling out their third shifts. They may find some challenges in acquiring the desired labor force quickly enough, though both companies are optimistic about their future in the country. The relatively small population of 5 million Slovakians assembled as much as 15% of the amount that the 300 mil. U.S. inhabitants churned out in 2007. To put the numbers in a global perspective, tiny Slovakia along with the Czech Republic (15 mil. inhabitants combined) produced almost half what the U.S. produced and one quarter of what the Chinese produced.

Slovakia has an extremely skilled lower level workforce

Along with the Czech Republic, Slovakia is leading the pack with close to 100% of secondary education attainment among people up to 34 years old. There is a wide gap between Slovakia and the Netherlands, the United Kingdom, or Italy. Slovakia has more than twice as many young people with secondary education than Portugal or Turkey; therefore, sophisticated production in the country can generate an outstanding return on investment. The infrastructure is already very well established and continues to improve. Therefore, analysts expect Slovakia to be the leader in manufacturing growth in the years to come.

Automakers Volkswagen, Kia, and Peugeot-Citroen were one of the key drivers of the country’s remarkable economic growth, which reached 10.4% in 20074. However, other key global manufacturers have spotted the opportunity for establishing successful production facilities too. Delphi, Samsung, Sony, Panasonic, Whirlpool and Siemens, along with a great number of other producers, all decided to take advantage of existing opportunities in the country. And new players are still coming in –Mitsubishi is investing $27mil. into a new plant in Nitra which is scheduled to start production in September, 2009. It will be Mitsubishi’s first plastic molding facility in Eastern Europe, and the company anticipates generating sales of $46 mil. by 2010