Volkswagen production in Slovakia to to triple

Despite the bad news since the beginning of the year, it now seems that car companies are increasing car production, and VW seems to be investing in their factories in our small country in a major way.

The production capacity of Volkswagen's plant in Bratislava will increase to 400,000 following the launch of serial production of its New Small Family car (called "UP!"), VW Slovakia CEO Andreas Tostmann has told the company magazine.

VW's production in Bratislava reached 187,000 in 2008.

"We'll begin production of the new model in early 2011. The number of employees will rise by 1,500, while we'll invest €308 million in the production of this small innovative car," said Tostmann, adding that the move will also lead to the introduction of "new structures" at the plant in Bratislava.

"We've proven that we're able to produce four models under a single roof. It'll be five with the New Small Family one," said Tostmann.

Volkswagen Slovakia achieved a profit of €283.5 million in 2008, which represented an increase of 25.9 percent year-on-year.

On the news front, a turnaround may come already in the fourth quarter, Finance Minister Jan Pociatek said after poor first quarter data on Friday.

'We expect that the situation will improve in the coming quarters,' he told a news conference.

'According to our data we may get mildly into the positive territory in the fourth quarter.'

The ministry had forecast a 2.4 percent full-year economic growth in February. An updated forecast is expected next month.

(Reporting by Martin Santa, writing by Jan Lopatka) Keywords: FINANCIAL SLOVAKIA/FINMIN

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Copyright Thomson Reuters 2009. All rights reserved

Investor confidence is now positive about central europe

INVESTOR confidence in central Europe entered positive territory for the first time in 20 months in May according to Sentiment Indicator published by ZEW Centre for European Economic Research and Erste Bank. May marked the first positive reading on the index since September 2007.

The index - which measures investor and analyst expectations for eastern Europe in the next six months rose to 6 points in May from minus 3.9 in April.

“All sentiment indicators are located in the positive range again,” according to Mariela Borrel, an
analyst for ZEW in Mannheim, Germany. The positive outlook “is a novelty since the outbreak of the financial crisis.”

Analysts seem to anticipate that the slower contraction rates being registered in the PMIs and lower interest rates in western Europe will feed through to increased demand for exports from eastern Europe while stimulus efforts in individual eastern countries will further help economic growth.

The six-month business outlook for Romania rose the most, gaining 26.1 points to 11.7 points,
following agreement to a €20-billion international loan by the European Union and the International Monetary Fund. Poland also did well, advancing 21.8 points to 20 points, followed by a 20.9-point gain over Hungary’s outlook, which rose to 15.3 points. Overall, the outlook
was most positive for the Czech Republic, which added 18.6 points to 24 points.

The Financial Market Survey CEE is a survey carried out by ZEW Mannheim and Erste Group Bank AG Vienna, among financial market experts and has been conducted monthly since May 2007. It offers insights into the experts’ assessment of the current economic situation and their expectations for central and eastern Europe, Austria and the euro zone for the next six months
concerning the general economic situation, inflation rates, interest rates, exchange rates and stock market indices. The CEE region observed in the survey consists of Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia and Slovenia.

Sudden deterioration hits Slovakia but Forbes believes this will be a short-lived effect.

The scale of the first quarter contraction may be deep but the fall in Slovak output is not the same as other countries in the region.

Slovakia, which only joined the euro zone at the start of this year, has been pummelled by the collapse in car manufacturing, which accounts for nearly 15 percent of the economy.

In a statistical curiosity though, Slovakia is technically not in recession even though it contracted by more than any country in Europe, apart from Latvia - the official definition of a recession is two consecutive quarters of negative growth. In the fourth quarter of 2008, Slovakia grew by 2.1 percent.

As it raced towards euro membership, Slovakia looked to become a magnet for car producers, as they looked for relatively cheap labor inside the single currency zone. It has attracted South Korean Kia Motors Corp, PSA Peugeot ( PEUGY.PK - news - people ) Citroen SA and Volkswagen AG ( VLKAF.PK - news - people ) in the capital, Bratislava.

Latvia's problems appear to be far more deep-rooted. While many analysts expect Slovakia to start recovering when global demand picks up again - some even think that could happen as soon as the second quarter this year when a raft of car scrappage schemes around the world come into effect and dealers must restock depleted inventory - Latvia still has a mountain to climb to deal with the recession on top of a collapsed real estate and credit bubble.

Recovery in the region will depend on what happens in the richer countries of Western Europe, which are key trade partners.
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"The bottom line remains that, while the worst of the financial crisis may have passed and the pace of decline in the real economy should now slow, a lasting return to positive growth remains dependent on a sustained recovery in the euro-zone and global risk appetite," said Neil Shearing, emerging Europe economist at Capital Economics in London.

All countries in Eastern Europe are facing their most difficult economic times since they began their transition from communist rule in the early 1990s. Latvia's Baltic neighbors Lithuania and Estonia contracted 9.5 percent and 6.5 percent respectively, while Hungary saw output fall by a further 2.3 percent, its fourth straight decline.

Eastern Europe is suffering in the global recession because its main sources of capital and credit have largely dried up, prompting some - Hungary, Latvia, Romania, Ukraine and Serbia - to go to the IMF for help to sustain their state finances and currencies.

Recently, the International Monetary Fund warned of worse to come if the European Union does not do more to fix the financial problems on its doorstep in Eastern Europe.

Associated Press Writer Karel Janicek in Prague, Czech Republic contributed to this report.

Copyright 2009 Associated Press. All rights reserved.

Slovakia and Chile top PwC EM 20 Index for investment attractiveness [PricewaterhouseCoopers press release]

MIDLAND companies should keep an eye on emerging markets such as Slovakia, China and Chile and be ready to invest once the global economy improves, according to experts at PricewaterhouseCoopers, the Birmingham Post online portal writes.

The business advice company says that although many emerging market countries are experiencing sharp slowdowns in economic activity due to the global financial crisis, not all of them have been equally affected. That means that UK companies need to reappraise the relative risks of investing in those markets.

The annual PwC EM 20 Index ranks the top 20 emerging market countries by investment
attractiveness in both the manufacturing and services sectors. In the manufacturing sector, Chile has topped the table in terms of its attractiveness to potential investors, replacing Egypt, which held the top spot last year. In the services sector, Slovakia has topped the table in terms of its attractiveness to potential investors,
replacing Poland, which has moved down to third.

Countries ranked higher in the Index tend to have a lower risk premium compared with others, at a time when upward revisions of risk are common.

The risk/reward economic model used to calculate the Index has been revised to take into account other elements of risk beyond the sovereign debt data primarily used
in the past. The Index now places greater weight on the fundamentals behind country risk such as political stability, regulatory effectiveness and the rule of law.

Sue Rissbrook, tax partner and emerging markets specialist PwC in the Midlands, said, “Even during these times of global financial crisis, there are still emerging markets that will appeal to Midland companies for long term foreign investment. For those considering such investments, laying the groundwork now, will ensure they are best placed to act once things pick up again.

KIA sees demand for Slovak made cars increase

DESPITE the economic downturn Kia Motors reports sales in Europe are on the rise. The company says they have seen major improvements in eight countries:

  • Slovakia,
  • Austria,
  • Germany,
  • Poland
  • Czech Republic,
  • Sweden,
  • France, and
  • Portugal
with total sales in April at 20,500 units.

Kia's role in Slovakia
The Euro 1 billion plant in Zilina, Slovakia is 200 kilometres north-east of Bratislava and has a capacity of 300,000 units a year and signifies Kia’s major commitment to the European market. The company is also constructing a new European headquarters and design centre in the centre of Frankfurt alongside the Messe which hosts the bi-annual motor show.

The Kia Motors Slovakia facility has created more than 3,000 jobs in the Zilina region and a number of suppliers are also constructing plants either alongside the new factory or in nearby regions. In total more than 10,000 jobs have been generated by the factory.

More than 4,500 job applications have been received with two-thirds having a university education and English language skills.

Kia has selected a number of tier-one suppliers for the plant including existing partners Hyundai Mobis and Hyundai Hysco. Other suppliers include Johnson Controls and PHA (Arvin Meritor) for seats and door modules.

High Anxieties

from the ever fantastic BBC FOUR