Editor's note: The information presented here on the Eastern
European market is part of IMM's International Molding Report
series, which is prepared by Agostino von Hassell of The Repton
Group. Von Hassel also writes IMM's Molders Economic Index.
contemplating expansion plans should take a closer look at Eastern
Europe. This market has 150 million educated people, growing consumer
spending power, and virtually no U.S. manufacturing presence.
What constitutes Eastern Europe? Countries included are the
Baltic Republics, Poland, Hungary, the Czech and Slovak Republics,
Romania, Bulgaria, Croatia, Slovenia, and even parts of Belarus
and the Ukraine. The former East Germany is essentially and culturally
part of Eastern Europe, less anchored in the West than most people
think. As peace advances, the rest of the old Yugoslavia will
be added to this list soon.
A Flurry of Activity
The incentives for U.S. molders to consider Eastern Europe
as a place to invest are numerous. The most appealing aspect is
that many Eastern European countries are now attempting to join
the European Community (EC).
What that means in practical terms is simple. Governments have
sped up legal and economic reforms, providing a framework that
allows business to invest by rules common in Western Europe. Subsidies
and tax incentives are plentiful as governments accelerate their
push to boost economic growth to levels that make them more acceptable
to the demands of Brussels, the headquarters of the EC.
What's more, as these countries join, they will enjoy a bounty
of economic subsidies made available by Brussels. For example,
when Portugal and Spain-countries with lower living standards-joined
the European Union, Brussels started massive spending to boost
economic growth. Why? The concept of the European Community works
only if the various economies quickly reach similarly high levels.
First in line to benefit from this largesse-estimated to be
at least 1 trillion euros over 10 years-will be firms already
operating in Eastern Europe. That, in addition to the already
apparent market potential, has created a flurry of new investments.
Most have come from Western European countries. Germans lead
the way, claiming a space with money that the sword couldn't conquer.
The German government, for more than 10 years, has favored massive
investments in Eastern Europe, and German language training is
heavily subsidized as Berlin hopes to make German the lingua franca
of the East. "We are almost a German colony," a Czech
government official interviewed for this report said. "We
would like to balance that with some U.S. investment soon."
However, countries such as the Czech and Slovak Republics,
Poland, and Hungary remain wary of German domination for understandable
historical reasons. "We see new U.S. investment as a way
to counter creeping German colonialism," a senior official
in Poland's economics ministry said. U.S. firms are seen as leaders
and innovators in advanced manufacturing technology as well as
Brussels is already pushing these countries to seek more outside
funds. In October Eric van Linden, head of the European Commission
delegation in Slovenia, said the country needs to attract "much
more foreign investment" and accelerate privatization.
Signs of Growth Abound
U.S. automotive molders are among the first who could find
solid opportunities in the East. "We would love to see U.S.
suppliers become active here," a Czech officer at Volkswagen-owned
Skoda Auto AS (Mlada Boleslav, Czech Republic) told IMM. "We
need the know-how for high-speed, high-quality parts molding to
help us sustain our growth."
Growth is solid for Skoda and other car builders in Eastern
Europe. In the first nine months of 2000 Skoda boosted sales growth
by 7.4 percent. Other Eastern carmakers have made similar gains.
Several other industries have emerged with promising opportunities
for growth, potentially ensuring profitable results for U.S. molders:
- Appliances are a major growth market across the whole
- Strong growth for consumer and business electronics
is anticipated in Poland, Hungary, the Czech Republic, Slovenia,
- Passenger car production growth in the Czech Republic,
Poland, Romania, and soon Serbia will provide a fertile market
for U.S. auto parts makers.
- Molders of large parts suitable for trucks, buses,
and passenger rail cars will find opportunities in Bulgaria, Hungary,
and the Czech Republics.
- All eastern European countries are clamoring for investment
in the disposable medical device market.
Examples of Investment
Here is a quick list of some of the more notable plastics-related
investments of the immediate past, just to give you a flavor for
what is currently being done.
- Electronics manufacturer and captive molder Key Tronic
Corp. (Spokane, WA) has already set up operations in Eastern Europe
and plans more.
- Sweden's Ericsson announced in October that it is moving
a substantial part of its mobile phone manufacturing to Hungary.
- French companies such as C2P, Knauf, SISA, Technnodev.
Tetras, Plastiques Faconnes du Dethunois, Jouet, and Berchet-operating
as a group-have targeted injection molding in Hungary as a major
opportunity for French firms to transplant manufacturing from
- Matsushita Electric Industrial Co. of Tokyo in October
announced plans to build a major mobile phone plant in Pardubice,
about 60 miles east of Prague.
- French injection molder Group Neyr has announced plans
to boost its manufacturing presence in the Czech Republic.
- Daiho Industrial of Japan will begin injection molding
cases for TV sets at Plzen, Czech Republic in the middle of 2001.
The cases will be used by a new TV manufacturing plant at the
same location owned by Matsushita.
- French molder Plastivaloire opened a second and third
molding plant in Poland this past summer at Detrzyn and Gliwice.
Its first molding plant in the region opened in 1996 at Kwidzyn,
- This summer British injection molder J&W Sanderson
Ltd. started expanding its automotive parts molding plant in Minsk,
Belarus. J&W is more optimistic about that market's growth
than Ford, which sold the plant.
- Injection molding machine maker Arburg says it plans
to expand its presence in the Czech Republic.
It may also be worthwhile for U.S. molders to explore joint
ventures with existing molding operations in the region. But how
to find these companies? The governments involved are opening
doors to foreign investors, providing leads and solid information.
There are also numerous and very aggressive companies that
could make interesting investment targets. Consider Prodplast
of Bucharest, Romania. The company molds car parts and consumer
products in addition to operating extrusion and blowmolding facilities.
With more than 800 skilled workers, the company is poised to take
off and service a large part of that market. What's needed, sources
there say, is "U.S. technology, U.S. money, and U.S. know-how."
In the Czech Republic, Isolit-Bravo Jablonne-a molder of consumer
goods and kitchen items-is growing quickly, with more than half
of its sales coming from contracts with foreign companies (mostly
in Western European) .
One final note of caution: While opportunities abound in Eastern
Europe, there are some severe structural problems that investors
should consider. For instance, a number of former communist state-owned
economic structures have not yet been dismantled. The central
planning mindset remains another obstacle in some cases, and corruption
is still a major problem in many countries. Prospective investors
should have local advisors with a proven track record.
The Repton Group
New York, NY
Agostino von Hassell
Phone: (212) 750-0824
Fax: (212) 752-5378
E-mail: [email protected]