Daimler’s plant in Hungary may help the country avoid the recession

Article by Christian A., on March 19, 2012

Commercial production will start at the end of this month at Daimler’s factory in Kecskemet, a town that is about an hour’s ride away from Budapest, Hungary. This plant, which was constructed for about EUR800 million, will have about 2,500 workers, most of which would be local. This factory will produce the Mercedes B class and a model of the new A class.

Daimler isn’t the first to put up a plant in Hungary. In the 1990s, Audi, Opel -- a division of General Motors -- and Japanese carmaker Suzuki were among those who had made Hungary a major fixture in the automotive industry. However, the Daimler’s project is the biggest new investment in the country within the past few years.

Daimler’s project also demonstrates the ambivalent relationship that the center-right government and investors have. Prime Minister Viktor Orban is supportive of huge manufacturing investments but he has expressed a resistance towards foreign capital.

Western companies and several business groups are hurting due to the imposition of several extra taxes. This makes it less likely that there will be future projects after the construction of Daimler’s plant in Kecskemet, Hungary.

So far, the Germans have rented about 330 houses. They got all the available energy efficient homes and they mostly paid over EUR1,000 a month, much higher than the typical rate. He added that having the Germans around is “very positive” for Kecskemet.

Right before production starts, there would have to be recruitment and training. Takarekbank analyst Gergely Suppan said that as soon as full planned capacity of 120,000 cars a year is reached, the plant and its local suppliers may add up to 5 percent to Hungary's overall industrial output – an influential factor on whether the economy will suffer or prosper this year.

In 2011, Daimler, considered the world's biggest maker of heavy-duty vehicles, logged a record EUR6.03 billion in net income in 2011. This represents a surge of 29 percent over the previous year. In the same year, Mercedes-Benz sold around 1.26 million units, which is still behind Audi with 1.3 million units sold and BMW with 1.38 million deliveries.

Despite, posting a record-breaking profit in 2011, Daimler cut the compensation of Dieter Zetsche, it chief executive officer. Zetche’s remuneration for 2010 amounted to EUR8.69 million but in 2011, he received EUR8.65 million ($11.5 million), including fixed salary, bonuses and long-term stock options.

Zetsche’s base salary jumped from EUR1.53 million to EUR2.01 million. However, the compensation may surge if Daimler’s performance in the next few years further improves.

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Topics: daimler, hungary

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