The Automotive Cluster of Slovenia
Automotive Industries spoke to Dusan Busen, Director of GIZ ACS to ask him how his organization hopes to improve the lot of automotive parts makers in Slovenia.
The Automotive Cluster of Slovenia, or ACS, based in Ljubljana, has over 54 members, including 47 companies and 7 R&D institutions. These members have a combined annual turnover of 2.3 billion Euros - 80 per cent of which comes from exports. Nearly twenty thousand people are employed in the companies that are based at the ACS. ACS was founded in 2001 and its aim was to build a reliable network of suppliers for vehicle manufacturers around the globe.
The ACS is basically a business association that brings together Slovenian automotive suppliers with global automotive companies. According to the organization's mission statement, ACS enhances the development of efficient communication among its members, who produce components, modules and systems for OE customers that manufacture cars, buses, Lorries and special vehicles. ACS says it enhances all activities connected with the research and development of new products and services with greater added value.
The ACS also says it provides important links between members, supporting synergy with suppliers of machines, tools, manufacturing, design, logistics and other services. As well as promoting joint members' activities to improve products and operations in R&D, production, quality assurance and to achieve and maintain business excellence. ACS keeps members promptly informed of new and existing issues in the automotive industry and develops and maintains information, educational and other infrastructure for its members' needs.
ACS says it represents members' interests and promotes their activities at home and abroad. ACS monitors the business environment, suggesting appropriate measures to economic environment enabling the members to respond to the constant challenges in the automotive industry.
Some of the companies based at the ACS include Johnson Controls which assembles conventional small parts, Goodyear Engineered Products, makes power transmission rubber products, air springs and auto hoses. Slovenian automotive suppliers industry includes about 85 producers that can be mainly defined as Tier 2 and Tier 3 suppliers. There are also Tier 1 system suppliers of pedal boxes, gear shift mechanisms, braking systems and other assemblies at CIMOS, auto-electric equipment at Iskra Avtoelektrika, ignition systems and electronics at AET, seats at TPV,Bowden cales at TBP, headlights at Hella Lux, Agis Plus, manufactures seats, seat mechanisms, locks, closing mechanisms, shield openers, rear view mirrors and other equipment. Other companies based in the ACS include Prevent Global which makes car seat covers, foam products, plastic parts for interiors and exteriors, and so on.
Also based in the ACS are automotive research institutes like the University of Ljubljana's faculty of electrical engineering micro-systems that designs and develops integrated sensors, scene object recognition, automotive starters and generators and discrete sensors. Similarly, the University of Maribor's faculty of mechanical engineering researches and develops automotive industry products like Bowden cables, springs, latches and batteries.
ACS members share information, develop new market opportunities and create greater added value by joint research and development. The management of ACS provides support for its members to integrate into global automotive industry and to improve the range of their products and services. The members of the ACS are basically automotive suppliers of components, modules and systems for OEM and aftermarket clients. ACS today believes it has become the central communication point between manufacturers, suppliers, research organizations and the Slovenian government, with innovative infrastructure support for Slovenian automotive industry.
Slovenia's automotive industry exports 80 per cent of its production mainly to the European Union - 40% of exports are to Germany, 21% goes to France, Italy accounts for 8% and the United Kingdom, United States and Spain account for the rest. Some of Slovenia's international automotive buyers include Volkswagen, BMW, Peugeot, Citroen, Audi, Ford, DaimlerChrysler and system suppliers makers like Bosch, Valeo, Magna Steyr, Visteon and Faurecia. According to estimates, Slovenia's automotive industry accounts for 6% of gross domestic product in the country. Most of Slovenia's automotive companies have globally recognized quality certifications like the QS 9000, VDA 6.1 and ISO TS 16949, ISO 14001.
On May 23rd this year, the ACS is holding its 4th annual convention and international business conference at Ljubljana. The aim of the convention and conference is to highlight Slovenia's and indeed, Eastern Europe's attractiveness as a manufacturing base. The European Association of Automotive Suppliers or CLEPA, has rated Slovenia (a member state of the European Union), as being only averagely attractive as a manufacturing hub in terms of cost-effectiveness. So the challenge for ACS and other automotive players in Slovenia is to innovate faster and increase productivity. At the convention, presentations will be made by international and local academicians, engineers, economists, and managers of the big players in the Slovenian automotive industry.
Part of the fourth annual convention, will be an international one on one business conference that will help bring together representatives of various companies together. Companies and other organizations like ACS (such as clusters from Austria, Germany, Hungary, Russia, Serbia and Montenegro, Croatia, Bosnia and Herzegovina, Sweden, UK, Holland, Poland, Belgium, Italy and France) will be taking part in the conference which is aimed at company presidents, directors and associates of Slovenian automotive companies. Each participant at the conference is likely to have discussion with at least 8 prospective, potential customers or partners.
Automotive Industries spoke to Dusan Busen, Director of GIZ ACS to ask him how his organization hopes to improve the lot of automotive parts makers in Slovenia.
AI: How attractive is Slovenia for automotive companies compared to other Eastern European countries?
Automotive and automotive supply companies have a long tradition side by side with the companies that are appearing with new programs (especially mechatronics, electronics and information technology) and are working on new developmental capacities, well established ways of cooperation with system suppliers and OEM’s. Slovenia is less attractive in labour intensive industrial and service activities. In other activities, especially in capital related and technologically intensive service activities and industries Slovenia is at least as competitive as the other Eastern European countries. Slovenian investment’s environment has a high business ethics as well as a well-regulated legislation system and it also works with quality investments services and a well qualified and ambitious labour force in the development and production a relatively high percentage of which can speak foreign languages which enables good communication. Slovenia has well developed export and import markets in the Western and South Eastern Europe. The taxation of capital profits is relatively favourable.
AI: Being a member state of the European Union, wages are dictated by EU laws. Does that mean that salaries are high therefore making Slovenian labor expensive? If so, what is the benefit of setting up base in Slovenia for global automotive companies?
Even before entering the EU it was a custom in Slovenia to use existing branch collective contracts (e.g. for metal, electric and metallurgic industry, for chemical and rubber industry and others) that were signed by employers and the trade unions’ representatives. In accordance with the tradition in Slovenia and taking as a model some of the leading industrial countries in Europe, especially Germany, the contracts include provisions or categories that regulate minimal conditions for the regulation of employment relationship and wages that the employer has to guarantee to his/her employees. The fact that Slovenia entered EU did not change the wages substantially, the only thing that changed were the requirements for higher wages that were requested by the trade unions and the requirements for better adaptability (less rigid workers’ protection) of labour force for the employers’ needs. The years of negotiations about the changes in collective contracts regarding the above mentioned requirements have resulted in a higher labour force price also in Slovenian automotive industry in comparison with other new EU members in Eastern and Central Europe.
It is understandable that foreign investors in automotive and automotive suppliers’ industry rarely chose Greenfield investments, instead they rather chose to buy shares in the existing companies and achieved the increase in the capital and thus became a preponderant or 100% owners. The reason to do so were their supply needs, knowledge about the companies’ performances and their well qualified labour force, good logistics and communication as well as a good legislation system and legal protection. The leading OEM in Slovenia and a number of automotive suppliers have been successfully doing business in a total, preponderant or the partial ownership of these companies.
AI: What are some of the new methods of automotive supplier collaboration that are evolving in Slovenia today? How does ACS play a role in this and how do you hope to help improve this collaboration?
The cooperation in the field of development and production on common products has been going on to a certain level ever since the beginning of ACS. A lot of attention has been dedicated to establishing a developmental environment for higher innovation. Within the framework of ACS a strategically important project “Polycentric technological centre as an international innovation system of Slovenian automotive supply industry” is being carried out; it is co financed from the structural funds through the Ministry of Economics. The project was established as a result of the findings that only through common investments the situation of Slovenian automotive suppliers can be improved as well as the cooperation between the economic and academic spheres. The basic strategic and developmental orientations of the polycentric technological centre are the profitable growth of sales and added value, gaining new buyers, promotion and common marketing, innovation processes, qualified suppliers, developmental infrastructure, information infrastructure, and basic knowledge. The project includes investments into research and development equipment in specialised technological centres (for new materials, technologies, and mechatronics) with the leading industrial producers and partly also with the research institutions on the one hand and a number of R&D projects in the field of new materials, technologies and new products on the other. The project has been prompted and operatively coordinated by ACS from the beginning.
The automotive cluster ACS is also one of the founders of the national technological platform for vehicles, roads and traffic. As the first national platform within the framework of EU TP ERTRAC and as a pilot project it will be given special attention and support. A technological platform based on the ERTRAC model but functioning in the field of energy and fuels supply, automotive production, suppliers to the automotive industry, users, research and development organisations, road infrastructure, intelligent transport systems, governmental representatives, and EU organisations representatives, cities, towns and regions as well as offers’ providers and service providers. The activities of all the partners involved are directed towards research and business opportunities within the framework of four pillars:
• Mobility, transport and roads
• Environment, energy and natural resources
• Traffic safety and general safety
• Planning and production systems
AI: Please describe how automotive supply chains work in Slovenia and how you hope to see them improve in the future.
The majority of automotive components manufactured by Slovenian suppliers belongs to the group of the products of lower or medium level complexity. It is mainly supplied with materials and elements from EU countries (metallurgic half-products, electronic elements, artificial materials,…) and it is partly supplied from the domestic raw materials production (aluminium, steel tin, ceramics, material for corrosion protection,…) This is followed by elements production and the production of complexes and systems. The most sophisticated products are produced by development suppliers that are supplied with elements of lower complexity and complexes from the circle of their collaborators who are technologically specialised and mainly SME.
The automotive components suppliers in Slovenia are mainly supplied with the tools by the local tool makers. Also a part of technological machine equipment, e.g. for transformation, heat treatment, welding, surface protection and also flexible automatic assemblage is purchased from the Slovenian equipment producers.
ACS ACS has been very intensely establishing contacts with other similar clusters and institutions in Europe and worldwide, they are members of CLEPA, the European association of automotive suppliers and they cooperate on numerous international projects of clustering and associating. ACS is very active in the states of the former Yugoslavia where it has been reviving automotive and suppliers’ activities; it can represent an important suppliers “pool” for Slovenian companies in the future. For this purpose a project “The development of suppliers’ net ACS in Serbia” was organized where it was stated that the main goal is to develop a quality suppliers’ net of companies, development institutions and support organizations in South-Eastern Europe for the needs of Slovenian automotive suppliers as a strategically important part of Slovenian economy. Raising the region’s innovation and competition will strengthen the competition of Slovenian suppliers and therefore the Slovenian government will support the project with the funds form UNIDO program.
AI: How does infrastructure and logistics rate in Slovenia compared to other European countries?
If we consider the infrastructure and the level of logistics in Slovenia in comparison with other European countries we can say that we are quite satisfied with it since we are connected with the countries of our most important buyers in Europe by a network of highways in Slovenia and in the neighbouring countries that enables a relatively fast “door-to-door” connection; The geographical position of Slovenia, it borders with Austria and Italy to the north and west, also makes it possible for Slovenia to have a efficient logistics. Telecommunications and networks are also developed at the European competitive level. Of course there is a desire to lower the costs of logistics even more by making some improvements to the fast international railway transport, by updating and lowering the costs of telecommunications and, naturally, by achieving the limitation of energy products that have a substantial influence on logistics.
With regard to the ever growing globalisation we expect more and more non-European supplies and as a consequence Slovenian suppliers and OEM and also the ones from the countries in the vicinity will find the increased capacity of the container transhipment at Koper port of great importance (the intercontinental ship transport of vehicles is at present already extensive)
The optimisation of the logistics ways within the framework of ACS members is being carried out as a pilot project within CORELOG project. The project CORELOG (COordinated REgional LOgistics) is an international research project that has been carried out within the framework of the INTERREG III B CADSES program. The purpose of the CORELOG project is to firstly analyze logistic currents in the cooperating countries and to suggest measures to rationalize them. In Slovenia, as a subject of detailed research within the framework of CORELOG the companies that are ACS members were chosen especially because the extent of ACS logistics activities is high and important enough and also because the members are organized in the cluster shape which enables easier coordination of activities of the project. The result will be the establishment of a common information portal that will make it possible to order transport in an uncomplicated way and also to optimize transport services among all the cooperating production companies and transporters (an increased critical mass that enables a higher number of optimal solutions). The consequences are that transport becomes more economical and reaches better quality.
AI: What do you hope the outcome of this year's ACS conference and convention will be?
I expect that distinguished representatives from MAGNA Steyr, VW, VOLVO Cars, McKinsey & Co., GKN Driveline, Siemens VDO Automotive, Accelerate, NextLevel Consulting and Slovenian companies ISKRA Avtoelektrika, UNIOR are going to present some innovations about involving suppliers into the vehicles’ development and the new ways to improve OEM’s business activities with suppliers, methods and ways to increase innovation and competition of automotive suppliers as well as some developmental trends in mechatronics, electronics, electric and mechanical drive system techniques and in general in the automotive production of tomorrow. The discussion and the informal meetings within the conference will allow the participants to exchange experience and to establish new business contacts at the business conference. Over 170 participants from Slovenia and Austria, Serbia and Montenegro, Croatia, Germany, Bosnia and Herzegovina, Sweden, Great Britain, Netherlands, Poland, Belgium, Italy and France will know how to take advantage of the opportunity that will be given at this year’s, fourth convention and business conference ACS in Bled. ACS is achieving a set goal of strengthening the developmental and industrial regional association in the Central European and South-Eastern European region.