The decision by French carmaker PSA Peugeot Citroen to build a new assembly plant in Trnava has cheered up Slovak politicians and economists. Economy Minister Robert Nemcsics described it as the investment of the decade. „Connecting Slovakia with a significant European carmaker will create new jobs. It will be a positive stimulus for Slovakia’s export and will positively influence the country’s business environment,“ said Mr. Nemcsics.

Alain Baldeyrou, PSA Peugeot Citroen representative, announced the carmaker’s decision to Minister Nemcsics on Wednesday. The plant should have an annual capacity of 300,000 cars and employ 3,500 people. Total investment costs will be EUR 700 million. „This investment is a result of several-months of talks between the investor and the Slovak Economy Ministry, while the Slovak government expresses special support for this project,“ writes the Economy Ministry in its press release.

The French carmaker will start building the Trnava plant in September this year. Basic capital expenditures are projected at EUR 710 million while the ceiling was set at EUR 860 million. „Slovakia’s expenditures for meeting obligations towards the investor are estimated at a total of SKK 6.5 billion, while this year the Slovak Government plans to earmark SKK 2.2 billion,“ said Finance Minister Ivan Miklos. The project’s contribution to public investments is estimated at SKK 9.5 billion and the return is calculated until midyear 2006. The Economy Minister estimates the new plant would increase Slovakia’s annual export by SKK 100 billion.

During the first phase the annual assembly capacity should range between 280,000 and 300,000 cars. The plant will employ 3,000 to 4,000 people while secondary employment should be between 6,000 and 7,000 people. The French investor asked for 299 hectares. This land should consist of 190 hectares of the basic premise and 109 hectares of supporting infrastructure. The Slovak government will disclose other technical requirements after signing a memorandum with the French side next week.

The Slovak government’s investments of SKK 2.2 billion planned for this year should cover preparations for the arrival of the investor, i.e. building infrastructure.

Behind the French carmaker’s decision Economy Minister Nemcsics sees political stability of the region, clearly defined government support for the project as well as the existing infrastructure and good locality.

Economic analysts expect that this news would influence foreign trade, the Slovak currency and employment in a positive way. Ludova Banka analyst Mario Blascak said that this investment is the first large green-field investment in Slovakia that would attract the attention of Europe and bring in other investors. He expects that the share motor vehicles in Slovakia’s total exports would increase to 40 percent in 2006. Tatra Banka analyst Robert Prega sees the French carmaker’s decision as the first „bite“ after Slovakia was given an invitation to become a member of the European Union (EU). „I expect that after this large investment, other smaller investors would arrive in Slovakia too,“ he said. According to Mr. Blascak, Slovakia should take one of the leading positions in the car production per capita chart. On the other hand, the high number of car assembly plants in Slovakia might increase the vulnerability of its economy to global trends in this branch.

The Slovak crown has already responded to the positive news and firmed by 25 hallers towards the euro. Analysts expect that demand for the Slovak currency should further increase since the planned investments would go through the foreign currency market.

PSA Peugeot Citroen will build a new assembly plant in Slovakia to extend its European production base after 2006. The plant will manufacture small, platform-1 vehicles.

The French carmaker announced that after having considered a number of sites in various central European countries, it decided to build the plant in Trnava because of its many advantages, notably its position in the center of Europe, a 190-hectare building site that is easily accessible by rail, highway and a navigable waterway. The next advantage is the option to create a supplier park next to the plant. PSA Peugeot Citroen points to the region’s manufacturing tradition, the availability of a well-educated labor force, and its proximity to major markets in which the carmaker is rapidly expanding.

The new site will bring the carmaker’s manufacturing base closer to markets where it is rapidly strengthening its position. In the six central European countries (Croatia, Hungary, Poland, Czech Republic, Slovakia and Slovenia), PSA Peugeot Citroen has increased its market share to 12.7 percent in 2002 from 5 percent five years ago.

An arm of German carmaker Volkswagen AG already successfully operates in Slovakia. Its 8,800-strong labor force assembled over 170,000 cars during the January-September period in 2002. Volkswagen invested EUR 664 million in the previous three years in Slovakia while the ten-year capital investment plan agreed with the Slovak government amounts to EUR 1.3 billion.