EMERGING MARKETS ANALYSIS: The fascinating story of Romania’s ‘other’ automaker
Ford's recently acquired Romanian plant has a tale to tell - only 25 years old, it's changed hands five times already. And its original concept - a low-cost source point for small European cars - is commonplace today. But in the 1970s, this was a radical plan, writes Mark Bursa
Behind the hubbub over the rise and rise of Dacia, there's been a happy ending for Romania's "other" automaker, Automobile Craiova.
Ford finally completed protracted negotiations to acquire the bankrupt automaker in March, paying the Romanian government EUR57m for a 72.4 per cent stake. The deal had been held up by a EU investigation into illegal state aid to the plant during its sale, and as a result, Ford had to repay EUR27m. A drop in the ocean for Ford, which is planning to spend a further EUR675m in boosting the plant's output to 300,000 units a year - a big improvement on its 2006 output of just 24,000 obsolete Daewoo models.
Already the plant is being upgraded, and will start building Ford Transit Connect light commercials from 2009, with unspecified small cars to follow a year later - possibly a derivative of the new Fiesta. It's capacity that Ford needs - sales of Transit Connect and the larger Transit vans are booming - plants in the UK and Turkey are working flat out, and Ford plans to start exporting the Connect to the US from next year.
Now, finally, workers at the plant can look forward to a positive future. Many have been there a long time - and they know all about the plant's fascinating past. In the 1990s, it became the prototype for Daewoo's ill-fated global drive. And before that, it was a pioneering plant for Citroën, supplying unique low-cost models built in Romania back to Western Europe - just like Dacia is doing right now with Logan and Sandero.
The Craiova plant's early history is very similar to that of Dacia - a joint venture between a French automaker and the Romanian state, under the dictatorial leadership of Nicolae Ceaucescu. History has judged Ceaucescu to be one of Europe's great 20th century villains - not quite in the Hitler or Stalin league, but not far behind. The Romanian people agreed, and executed the tyrant in 1989.
But twenty years earlier, he was actively courted by Western Governments, because of his willingness to do deals. Ceaucescu might have been odious, but he was no puppet of the Soviet Union - he spoke out against the Soviets' "Prague Spring" put-down of the Czechoslovakian uprising of 1968, for example. And during the Cold War, Western leaders believed that getting Ceaucescu on side could bring about a schism in the Eastern Bloc. And what better way to win the Romanians over to the joys of Capitalism than by providing them with new cars.
Through Dacia, Renault had already sewn up the Romanian sedan market with its R12. Citroën aimed lower - a smaller, cheaper car for those Romanian comrades who couldn't afford a Dacia. The venture would be called Oltcit - 'Olt' for the Oltenia region of Romania where the factory is located, and Cit for Citroën. The company's logo was a single Citroën Chevron piercing a letter 'O'.
Citroën had another motive for this - it needed a smaller car in Europe. Much of the Citroën range was ageing - an oddball blend of utilitarian small cars (2CV, Ami, Dyane) and the 20-year-old luxury DS. This was 1974, and the first oil crisis was starting to bite - another curious echo of today's economic situation.
Citroën had already designed the car - it was called the Prototype Y, and it was intended to replace the quirky 1960s-vintage Ami. Building Prototype Y in Romania was a bold and risky move for the French company - and one that was tinged with a certain amount of desperation. Citroën was in a financial mess - a mess that would lead to its bail-out by Peugeot and the formation of PSA.
Millions had been squandered on the Maserati-engined Citroën SM grand tourer, plus an ill-fated rotary engine project. The new GS sedan finally plugged the mid-range gap, but it had also been an expensive project. The coffers were empty, and Michelin, Citroën's principal shareholder, started to panic. And when the oil crisis hit, the French government stepped in and organised a merger with Peugeot.
In the midst of all this, the Oltcit deal went ahead. The French didn't want to upset their new Romanian friend in the furry hat, and PSA agreed to carry on with the deal, finally signing an agreement in 1976. This was a complex deal, with the Romanian government taking a 64 per cent shareholding and Citroën 36 per cent.
PSA agreed to take 40 per cent of the production for export to France, Austria, the Netherlands, Belgium and Italy, while Oltcit would sell the car in Romania, other Communist states and Latin America. But PSA could not take currency out of the country - so was forced to spend its profits on Romanian goods. Negotiations dragged on for so long that a further six years would pass before the first Oltcits rolled off the line, in October 1982.
A curious looking three-door hatchback, the Oltcit resembles it European contemporary, the Citroën Visa. But the two cars shared almost no components. The Visa, launched in 1978, was a Citroën-bodied Peugeot 104, and it only came as a five-door hatchback. The Oltcit joined the European range in 1985, where it was rebadged Citroën Axel, and came with 652cc, 1.1-litre and 1.3-litre air-cooled engines.
By this time, the Axel was well over a decade old. But you can guarantee hardcore Citroën enthusiasts will get misty-eyed over it. It's considered the last true Citroën - designed without the grim interference of Peugeot's cost-saving badge-engineering, already upsetting the Citroënati with cars like the LN, a rebadged 104 three-door, launched in 1974. Sacré Bleu!
Axel couldn't be anything other than Citroën, with the same boxer engines as the 2CV, Ami and GS - including a 652cc flat twin - and thoroughly quirky styling both inside and out. For evidence, see the above picture of a crumbling Oltcit seen on the Bucharest roadside earlier this month.
The plant that PSA built was big and modern, but Romanian bureaucracy meant it never came close to the projected 130,000 cars a year production target. Eventually it should have reached 300,000 - but between 1984 and 1988 only 60,000 Oltcits were built, and sales in Western Europe were severely hampered by poor quality and reliability problems. It's said that each Axel sold cost the company $100 in warranty claims. Part of the problem was the Ceausescu regime's insistence that Oltcits had 40 per cent local content - but Romanian parts weren't up to the job.
With Ceaucescu gone, the economy started to fall apart. Oltcit didn't have the established market presence of Dacia - nor did it have a strong leader like Dacia's Constantin Stroe. The launch of the modern Citroën AX hatchback in 1988 meant Citroën no longer needed the Axel - nor the headache of dealing with chaotic post-Ceaucescu Romania. It pulled out of the venture in 1990, and production tumbled to just 20,000 by 1991. Oltcit, now 100% state-owned, was in trouble.
To recognise the change of ownership, the company was renamed Oltena, and the cars got a facelift. A new partner was sought - and the prize asset of a less-than-10-year-old plant was attractive. Chrysler - now lacking a European presence after PSA snaffled up Chrysler Europe, wanted a small car to sell in North America to compete with the Korean-sourced small Ford and GM models. But while Chrysler apparently was impressed with the facility, the cars' air-cooled engines wouldn't do. Chrysler reluctantly walked away.
Salvation came in 1994 when Daewoo, the ambitious Korean automaker that had bought out its former partner GM, set about a global expansion drive. Having been rebuffed by Dacia, Daewoo chairman Kim Woo-choong made Oltena the first acquisition in an East European buying spree that would also include FSO, Avia, Lublin and AvtoZAZ.
Oltena became Rodae (Romanian Daewoo) and production commenced - initially GM-based Cielo and Espero sedans and Tico minicars. The last Oltcit rolled off the line in 1996, replaced by more Daewoo models - Nubira and Matiz. An engine plant was added in 1997. But the new dawn was short-lived. Daewoo collapsed in 1999, and when GM bought the remnants of the company, it didn't take Rodae.
Sales slumped - the old Daewoo models couldn't be exported, and were uncompetitive in the market - especially after 2004, when Dacia's Logan went live. Once again the company became state-owned, and now the deal with Ford finally gives the plant a solid future. That 300,000-unit production target is now an achievable target. And the plant will again become an exporter.
Maybe if the Oltcit car could have been produced within a decade of its design it might not have been obsolete the day it was launched. But let's face it, a French company in financial turmoil, trying to strike a deal with a Communist bureaucracy, is not a recipe for a smooth deal.
In the end, the bold plan to source from Eastern Europe fell foul of product quality issues. That doesn't mean it wasn't a good idea - Fiat managed to source the 126 from Poland in 1974 after all, in a plant that now makes the new 500. And PSA's modern-day Axel-sized car, the Citroën C1/Peugeot 107, is made in another low-cost, former Communist state, the Czech Republic. The Oltcit story is a resonant one - it was a battle against the odds - and the odds won.
Mark 'Coolbear' Bursa