Czech and Slovak carmakers are still planning to raise output this year, while their European rivals are cutting production as demand keeps shrinking amid the current economic crisis.

German car makers Opel, BMW, Ford and Daimler announced production cuts last week.

But their Czech and Slovak rivals benefit from a focus on smaller cars with lower consumption and emissions, popular even at the time of crisis.

"Car output will grow by 8-10 percent this year against 2007. We do not expect to reduce the 2008 estimate," Maria Novakova, director of the Slovak Automotive Industry Association, told AFP on Friday.

Her Czech counterpart Martin Jahn said the growth in the Czech Republic would be slower, but added he too was optimistic.

Production to grow

"Car production will grow by 4.0-5.0 percent this year, against a previously expected 8.0 percent. The growth in 2009 will also be slower," he said, adding the situation should be back to normal as of 2010.

TPCA, a joint venture of Toyota Motor Corporation and PSA Peugeot Citroen based east of Prague, said on Friday it was going to raise production capacity to 340 000 units next year from this year's 320 000 cars.

"Demand for our models on western European markets keeps growing," said Jiri Cerny, TPCA's vice-president in charge of production.

Czech and Slovak factories "usually work well, the cars sell well locally and remain attractive for buyers, above all the small models that are really trendy," Fitch Rating expert Emmanuel Bulle told AFP on Friday.

Skoda Auto, the largest Czech producer, which turned out 623 529 cars in 2007, has announced it will halt production for three weeks in the rest of the year, but the Volkswagen unit raised sales by 17.9 percent in the first half of the year.

Besides, South Korea's Hyundai said it would launch production in its plant with initial capacity of 200 000 cars a year before the end of 2008, earlier than planned.

Slovakia's Volkswagen, PSA Peugeot Citroen and Kia Motors plants said they were not cutting production either.

"We will meet the annual production plan of 220 000 cars this year," Kia Motors Slovakia spokesperson Dusan Dvorak told AFP.

"Today's economic environment, especially in the automotive industry, is very challenging. We are ready to offset possible fluctuations in production by high productivity and flexibility," said Daniela Rutsch, spokesperson for the local Volkswagen plant.

PSA Peugeot Citroen spokesperson Peter Svec said the company benefited from its focus on small low-consumption cars, just like its Czech sister.

No emergency

"The current size of the crisis doesn't require any emergency measures. We expect to reach the expected production of 200 000 cars in 2008," said Svec.

Slovakia, the world's leader in car production per capita, almost doubled car output to 571 071 units in 2007 compared with 2006. In August, output grew by 16.7 percent after a 27.7 percent increase in July.

Czech car output grew by 10 percent to 744 759 units in January-September against a year ago, the Czech Automotive Industry Association said on Friday.

In 2007, Czech factories produced cars worth almost 641-billion koruna ($35.6-billion), making up 18 percent of the country's GDP. Slovak carmakers accounted for a quarter of the country's GDP for 2007.

The weight of the car industry in GDP may increase further this year for both countries after the International Monetary Fund revised its 2008 GDP growth estimates down to 7.4 percent for Slovakia and four percent for the Czech Republic this week.

On the other hand, the current financial crisis is beginning to affect Czech car parts makers, who are planning layoffs.

"The Czech car industry as a whole employs 130 000 staff, of whom 2500-3500 may lose jobs by early 2009," said Pavel Juricek, the chief executive of car locks, pedals and doors maker Brano.

Car parts makers, accounting for 56 percent of all Czech car industry exports, are losing clients with production cuts west of the Czech border, but they can still rely on domestic certainties.

"We are lucky to have Czech producers. Skoda Auto is reducing production, but not as much as companies in western Europe, and TPCA keeps growing," Juricek added.

AFP