FAG Continues Investment and Expansion in Hungary

FAG Automotive Hungary Kft. (a subsidiary of INA Schaeffler KG, Germany) is continuing to build up its operations in Hungary, with significant investment and expansion in 2003. FAG originally set up the Hungarian operation in 1999 to address its need for a regional source of price-competitive automotive size (under 90mm OD) tapered roller bearings. The Hungarian operation is essentially two businesses, FAG Components and FAG Automotive, but they operate in tandem. Nearby, in the same industrial park, is Eurings Ltd. (a joint venture of FAG, Germany, and SIMEST, Italy), which supplies hot forged and rolled bearing rings to FAG Hungary. Eurings is planning an expansion in 2004 which will nearly double its bearing ring capacity from the current 8,000 tons of semifinished parts and boost its employment to over 300 people working three shifts. Tsubaki Hoover has a bearing ball plant nearby, and Dongwoo Kft. and Kaewoo MGM are also in the same area. Stephan Szakal, a Managing Director of the company, said FAG has recently invested over €5.5 million (USD $6.1 million) to push production capacity for those automotive size tapered roller bearings from 7.5 million up to 10 million sets per year. FAG's worldwide manufacturing goal, said Mr. Szakal, is to eventually reduce the breadth of product manufactured in each facility in favor of consolidating production of particular sizes and types to create more focused, high-volume facilities. To further encourage FAG's continued investment in Hungary, Debrecen waived all taxes for FAG through 2007. Altogether, the Hungarian government claims to have granted more than FOR425 million ($1.9 million) in investment tax credits to FAG. So far in 2003, FAG Hungary has added 50 production workers to its Debrecen plant, raising employment there to more than 650 people. Sales for the Hungarian operations are forecast to top €45 million ($50.3 million) in 2003. Through 2004, the company said it expects the current rate of expansion and investment could continue. If FAG's customers, from Audi to BMW to Ford, VW, DaimlerChrysler and Scania, continue to expand their eastern European production, FAG Automotive Hungary will continue to expand as well. One of the reasons for locating the facility in eastern Hungary was access to qualified workers. Budapest and western Hungary are seen as less desirable locations in that regard. Debrecen is the second-largest city in Hungary, with 206,000 residents.