The Hungarian plant of Suzuki Motor Corp has begun building prototypes of a new small car code-named YM6, the first milestone in a project worth over 60bn-forints (US$250m) that will launch output of two new vehicles and two engines before 2005. Ryan Tutak reports on Magyar Suzuki’s pivotal role in Suzuki’s European strategy.

Magyar Suzuki Rt (MS), based roughly 40km northwest of Budapest in Esztergom, started assembling the models on 30 November 2002 with plans to make 32 units this year.

The vehicle (similar to Suzuki Ignis, yet still officially unnamed) is scheduled to enter mass production in March 2003, but delays may force a return to a previous target of May 2003. The design freeze for certain parts specifications recently was postponed from December 2002 to January 2003; and some components makers said they may be unable to supply YM6 before May 2003, if MS further alters requirements.

MS, which is investing 16bn forints to introduce YM6, still forecasts output of the vehicle at 25,000 in March-to-September 2003, then 50,000 in 2004 (the annual capacity target).

Parallel to the car rollout, the Esztergom factory plans to start assembling a pair of petrol engines via kits from Japan: M13E/G (1.3 litres) and M15 (1.5 litres). Output, slated for 50,000 a year, will mainly serve YM6, but volumes also could feed another model already built in Hungary – Wagon R+. (Motor production might be deferred until August 2003, if the introduction of YM6 is strained.)

To serve growing demand for oil-burning engines, MS plans to fit YM6 with 1.251-litre, 16-valve diesel motors from Fiat Auto Powertrain Polska Sp z oo in Bielsko-Biala, Poland. (This plant is a subsidiary of Fiat-GM Powertrain BV, a 50/50 venture between Fiat Auto SpA and General Motors Corp.) MS’s annual orders of these engines, featuring multijet common-rail fuel injection, eventually could top 18,000 for all its models.

A 1.0-litre petrol engine from Suzuki in Japan also should be available for YM6 (likely 20cm longer than Ignis). The car’s main competitors are expected to be Fiat Punto and Ford Fiesta.

Roughly 10,000 units a year will be made with four-wheel drive, partly for Subaru. [Since 1995, MS has rebadged a slice of its production of Suzuki Swift as Justy for Subaru, the brand of Fuji Heavy Industries Ltd. By March 2003, the Hungarian plant plans to cease output of Swift (built there since the factory opened in 1992). However, Suzuki apparently is still deciding whether YM6 should be named Ignis, Swift or something else. (Suzuki can confusingly switch model names for the same vehicle in different markets: Ignis in Europe has been called Swift in Japan, while Swift in Europe has been called Cultus in Japan.)]

But the biggest element in MS’s expansion is YN2, code-name for another small car, expected to resemble closely Concept-S, a model unveiled by Suzuki at Mondial de l’Automobile in Paris (26 September to 13 October 2002).

The Hungarian plant expects to invest around 30bn forints to launch YN2, a five-seater designed to be cheaper and smaller than YM6. YN2 should weigh 900kg-1050kg, while running on petrol engines of 1.2 litres and 1.5 litres. Concept-S, 3650mm long and 1730mm wide, had a 1.6-litre motor with sequential transmission plus permanent four-wheel drive.

While meeting 200 suppliers in Budapest on 3 September 2002, Suzuki executives said YN2 would be a “world car” with MS designated the main plant; annual capacity would be 100,000 in Hungary and 50,000 in Japan with output jointly inaugurated in December 2004. (Japan is now to start in August 2004.) Production would follow in China and India, the officials said without mentioning timetables or volumes.

Further, these managers said, Suzuki eventually aims to sell 500,000 cars annually in Europe (East and West) with half the volume originating in Hungary – suggesting MS would build 250,000 a year. [Subsequently, Suzuki said it expects MS to make only 200,000 per year (roughly 100,000 YN2, 50,000 Wagon R+, 50,000 YM6), and output may reach only 150,000 by 2005.]

Even in talks with key suppliers, Suzuki has been cagey about the profile of YN2: sometimes saying it will compete with an austere family model like the W90/X90 planned by Renault SA for Automobile Dacia SA in Romania, other times saying it will compete with an esteemed small vehicle like Volkswagen Polo.

“I worry YM6 and YN2 may be too similar to each other – and not only in size,” said one Japanese executive at an auto parts maker. “They could compete against each other, not against different brands.”

Consistently, though, Suzuki has said it must cut 30% off variable costs for YN2 to be profitable, and it has hoped to secure low prices from parts makers by inviting them to bid to supply YN2 in Hungary and Japan. (MS suppliers have complained that volumes from Esztergom alone are too small to be economical.)

But the project still seems to be evolving, due partly to GM’s burgeoning stable of affiliates. In recent years, the US automaker has boosted its stake in Suzuki to 20.1%, while acquiring 42.1% of GM Daewoo Auto & Technology Co (also owned 14.9% by Suzuki), 20% of Fuji and 20% of Fiat – all of these companies have car brands built in Eastern Europe.

Indeed, Suzuki’s industrial ties to GM’s network in Eastern Europe are spreading. MS already has made Wagon R+ for three years in cooperation with a plant in Poland owned by GM’s Adam Opel AG; Opel Polska Sp z oo builds a version of the vehicle named Agila. Now the Esztergom factory plans to buy Fiat engines from Poland, and parts-procurement responsibility for YN2 recently shifted from Suzuki to GM-Fiat Worldwide Purchasing BV.

Potentially of greater significance: Fiat is contemplating production of a small sport-utility vehicle based on YN2, while Suzuki is starting to wonder whether it will be asked to buy a stake in Fiat, in the event GM takes over the ailing Italian company (as Suzuki supported the US automaker’s purchase of part of Daewoo Motor Co).

MS (fully named Magyar Suzuki Szemelygepkocsi Gyarto es Ertekesito Rt) is owned 97.31% by Suzuki and 2.46% by Japanese trading house Itochu Corp. It remains the only maker of Japanese vehicles in Eastern Europe, though that will change in 2005 with the launch of a venture in Czech Republic between Toyota Motor Corp and PSA Peugeot Citroen.

The Esztergom plant expects to conclude a tenth consecutive year of increased production with volumes projected to rise from 85,105 in 2001 to 86,000 in 2002.

Continued buoyancy in production is helping MS burnish its finances. The company anticipates after-tax profit of 2bn forints on net income of 146bn forints in 2002, following an after-tax loss of 800m forints on net income of 148.3bn forints in 2001.

Roughly 15bn forints of MS’s investment will cover the establishment of engine production plus the expansion and modernisation of factory operations that will benefit all models, such as certain assembling, painting, pressing and welding capacities.

(Exchange rate: $1 = 239.55 forints.)

Contact Ryan James Tutak, associate editor of just-auto.com for Eastern Europe:
E  rjt@pronet.hu
F  +36-1 / 317-7257
T  +36-1 / 266-2693