Roads leading to Romania

Romania is developing as an automotive hub. Companies like Renault, Schlemmer, Continental, Aker-Kvaerner, Landini, Johnson Controls, Delphi, Manufactura Moderna de Metales, Pirelli, and Yazaki have a presence in the country. Reportedly, even Chinese automotive manufacturer Chery Vehicles is scouting around for manufacturing locations in Romania. Further investments are expected with the country becoming part of the EU.
Helping companies set up in Romania is the IPEC Group.

Automotive Industries interviewed Matt Carnogursky, general manager, IPEC Management Eastern SRL.

AI: Tell us about the growing automotive business in Romania.

Carnogursky: Since the EU accession in the fall of 2006 it seems as if the floodgates opened and many automotive manufacturers started coming into the country. We are rolling out projects for about 10 automotive suppliers.

AI: How easy is it for companies to manage their investments in the country and how can IPEC help?

Carnogursky: The execution has become more predictable from a bureaucratic point of view. However, the recent real-estate and construction boom in the country brought new challenges in terms of land prices and contractor availability. The choice of the right location has become more significant because of the ongoing run on the available locations by so many foreign investors. Romania’s advantage of low pay relative to most European countries still holds true but there are several exceptions: managers with foreign experience and technical specialists, amongst others, fetch near-western salaries.

AI: Did investing in Romania become easier with the EU accession?

Carnogursky: Not really, only its critical success factors changed.

AI: How does IPEC help automotive companies set up shop in Romania?

Carnogursky: IPEC has been closely tracking the trends, depletion of labor resources in certain areas, and geographic directions in which the run on the resources has continued. This is invaluable information – you would want to make your multi-million-Euro investment at a location where you can operate it profitably for many years to come.

AI: Where do you turn to secure land for your plant when the land prices seem to be escalating?

Carnogursky: For some companies a purchase of private land is a valid option because they value a greater flexibility to choose their location. Other companies can take advantage of public land, which is available for sale by auction in many municipalities. The next task becomes sourcing good architects, design specialists, contractors, and employees. IPEC supports its customers in all these areas and manages the entire process. We see demand for leased factories, which simplifies the investor’s task to first determining the plant specification with us and then paying the rent. IPEC offers pre-built or custom-built rental space at locations “off the beaten track”, where we offer good access to stable labor resources, in conjunction with good logistics access.

AI: Why is Romania’s location so important to auto companies?

Carnogursky: Automotive companies come to Romania to produce for the local market and/or to have a low-cost production base for export. The local automotive market consists of two OEM’s: Renault in Pitesti and Daewoo in Craiova. Both plants are in south-eastern Romania, relatively inaccessible by road from Romania’s western border. However, the growing number of tier-1 and tier-2 suppliers, many of them clustered along the western border, from where they can easily reach the OEMs of Central and Western Europe, create an automotive market in its own right. Just 2-3 years ago the supply of labor was very good while the supporting technologies were scarce. Now the technologies are moving in at the expense of the available labor. There is lots of labor in this country of 22 million – you just have to look more carefully.

AI: What are some of the new automotive projects that Romania has attracted over the last year? What role has IPEC played in these projects?

Carnogursky: Renault is building a new transmission plant and a large R&D center. Tier-2/3 suppliers are moving to the Pitesti area to support the Renault plant. Steel suppliers are scouting for locations. Siemens VDO has invested. Trelleborg and Pirelli, amongst others, are also investing. IPEC has been working with several of these, preparing locations, providing project management, securing financing for build-to-lease facilities, and pre-building multi-tenant production facilities at strategic locations.