The surprise decision to build Kia models at a new car plant in Slovakia reflects the growing influence of Kim Yong-Hwan, the brand’s senior executive vice president and chief operating officer, Automotive News Europe said.


The company’s medium-term plan calls for 500,000 Kia sales in Europe by 2008 compared with 400,000 Hyundai brand models.


Kia needs the plant’s output to reach its 2008 goal, Kim said, adding that the new factory would build small and lower-medium segment models that are being designed specifically for European customers.


Construction work on the new plant, north-east of the Slovakian capital Bratislava, is scheduled to start next month with the first production car coming off the line in November 2006. The plant will initially have capacity for 200,000 cars per year.


Kia chose Zilina, Slovakia, over Poland, the other finalist site. “The primary factors in our decision were inbound and outbound logistics, supplier proximity, infrastructure, work forces and economic considerations,” Kim said. He set the construction costs at €700 million. The plant site has 150 hectares of space and will employ 2,400 staff.


Poles are pointing fingers after Kia decided to build the plant in Slovakia rather than in Kobierzyc, Poland. Was it the high labour costs, taxes and unclear government bureaucracy, poor negotiation skills or weak infrastructure? asked an online poll at Puls Biznesu, a Polish daily.


Underlying this is the bigger issue: will Poland ever develop an automotive sector to reflect its position as central Europe’s largest country with a population of 42 million?


Deputy prime minister Jerzy Hausner blamed the infrastructure. In a Polish radio interview, he said that the Slovak site, unlike the Polish site, had a rail siding and access to a modern transportation network. And labour costs were indeed an issue, he added.


The Polish ministry of transportation disagreed, arguing the site offered to Hyundai was very close to the A4 highway and that, by the end of 2005, the highway would reach Krakow to the east.


Analysts say Hyundai’s decision is not a disaster for Poland. “It is a setback for the automotive industry there, but it is not a make-or-break event,” said Matthew Pottle, a partner at PricewaterhouseCoopers in Prague.


Elsewhere in Poland, General Motors, Fiat and Volkswagen have assembly plants. VW also has an engine plant, GM has two joint-venture engine plants with Fiat and Isuzu while Toyota has a transmission and petrol engine plant plus a diesel engine plant.