Central Europe car makers face labour shortage

TRNAVA, Slovakia, Feb 14 (Reuters) As Europe's car manufacturing has shifted from west to east in the past decade, Slovakia has earned a reputation as a Detroit in the heart of Europe.

Volkswagen, Peugeot and Kia either have plants here or are setting up production, taking advantage of cheap labour, low taxation and Slovakia's location.

But the new plants have now soaked up the available work force, to the point that car makers must now offer incentives and are even starting to seek workers from other countries.

''We see a lack of labour force for certain positions. There is much less labour with a higher qualification,'' said Dusan Dvorak, a spokesman for the latest company opening shop here, South Korea's Kia Motors . ''We have advertised specific positions in the neighbouring countries.'' Frantisek Bardy, a 27-year-old who has worked at several auto plants, is a case in point. When he was looking for a new job, he was spoilt for choice, finally settling on the new Peugeot plant in Trnava.

Bardy does not mind travelling more than 150 kilometers (93 miles) every two weeks to work, even though his apartment is just around the corner from Kia's plant near the northwestern town of Zilina.

''I also went for an interview at Kia, but the salary was not that good,'' he said as he tested cooling systems on a Peugeot 207 assembly line. ''They told me there's a chance for career growth here and also offered housing so I took this job,'' he said.

It is easy to see why France's PSA Peugeot Citroen picked this tiny, mainly rural nation to move production from its plant near Coventry, Britain, which is due to close this year.

Not only are wages less than a third of those in western Europe, but also the government offers attractive incentives and a friendly tax regime.

By 2012, Slovakia will be producing 840,713 passenger cars a year, more per capita than any other country in the world, according to J.D. Power Automotive Forecasting.

Last year, with production of 267,032, it ranked behind central European neighbors the Czech Republic and Poland, with 826,629 and 589,561 vehicles, respectively, J.D. Power said.

FIGHT FOR LABOUR Seeing a labor shortage, Peugeot and other firms have taken a more direct route to cultivate skilled technicians and line workers.

''We decided to co-operate with technical schools in a way they can prepare qualified people for the car industry,'' said Peugeot's Slovak spokesman Peter Svec, standing in workers' coffee area next to the assembly line.

''It's important that not only us, but also our suppliers have a good quality workforce,'' he said.

By 2011, car-making capacity in Poland, Czech Republic, Hungary and Slovakia will rise by 43 percent to 3.46 million cars a year, or nearly 4 percent of global light vehicle production, PricewaterhouseCoopers Automotive Institute said.

(For a FACTBOX, see ''Eastern Europe's car industry'' [ID:nL08885792]) But that increase, together with an easing of labour restrictions in western Europe, will further toughen the fight for skilled labour.

''We already feel a lack of qualified workforce,'' said Silvia Nosalova, spokeswoman of Volkswagen Slovakia , the country's top firm by sales and the sector backbone since 1991.

''Imports of labour force will probably be unavoidable when all three carmakers will be fully onstream,'' said Nosalova, whose firm accounts for 16 percent of Slovakia's exports.

Volkswagen is already feeling the pressure. Buses hired by Volkswagen bring workers to its assembly plant near the capital Bratislava every day from as far as 100 kilometers (62 miles) away. Some 17 percent of its 9,000 employees live farther than 150 kilometres (93 miles) away.

Hundreds of parts makers have flocked to the area to be as close as they can to production lines, meeting demand for spark plugs, radiators, transmission systems and other components, further draining the country's small job market.

In Slovakia alone, as many as 40,000 new jobs in the automotive industry may be created in next three to four years, bringing the total to 100,000, almost double the 2004 level, Slovak Association of Automotive Industry (ZAP) predicts.

Some investors, such as a joint-venture between Ford Motor Co and German part supplier GETRAG, are already settling in much less-crowded eastern Slovakia, attracted by availability of skilled labour or booming eastern markets such as Russia.

''In central Europe, there is a lot of car plants located within a 200-kilometre radius. It is a big attraction for suppliers,'' said Carol Thomas, analyst at J.D. Power. ''The whole of central Europe has become much tighter to find good labour.'' REUTERS PV DS1525