Cranking Up Krakow Delphi plots Eastern European growth from Poland KRAKOW, Poland - Down the road from an archaic commun-munist-era pipeline pumping hot water above ground into this former capital town to heat homes sits Delphi Automotive Systems Inc.'s Polish crown jewel.

A striking contrast to the dreary surroundings, the facility is the world's largest auto supplier's newest technical center. Technical Center Krakow (TCK) officially opened its doors in late July and continues to ramp up, with full engineering services yet to begin.

The tech center is the company's latest push into the Polish market and is further evidence of Delphi's commitment to its East European customers, company officials say.

Delphi has invested $150 million in Poland since the purchase of its first plant here in 1994. The supplier now has five plants, the technical center and 4,700 workers in Poland.

"Poland has always been a very strong performing center of component development," says Jose Maria Alapont, president of Delphi Europe.

Delphi counts Fiat SpA, Daewoo Motor Co. Ltd. and Isuzu Motors Ltd. among its largest customers in Poland. The company also supplies Volvo Car Corp., Ford Motor Co., DaimlerChrysler AG, Adam Opel AG, Saab Automobile AB, MG Rover and Rolls-Royce Motor Cars Ltd.

The new technical center serves as another step in servicing those European customers who can work with Delphi at TCK or contract to have a TCK engineer work in their facility. "We have major opportunities in terms of customer development and then production programs," Mr. Alapont says.

TCK eventually will become Delphi's global center of expertise for shock and strut modular systems. The work force now includes 83 employees, which will grow to 350 by 2005.

The new facility, equipped with Poland's first voice mail system, sits on 32 acres (14 ha) on the edge of the Jurajski National Park, which locals fondly refer to as their own version of Hollywood's Jurassic Park. It's high-tech with some history, Delphi says.

The facility is built on 20 acres (8 ha) and has room for expansion, which could include another 850 workers.

Poland Country Director for Delphi, Leszek Waliszewski, boasts that the technical center, built on a greenfield site, was on time and under budget. Project 1111 - for its 1-year, 1-month and 11-day completion - was finished with $13 million in building costs and $5.5 million in equipment.

But it was about two years earlier that Delphi began hiring local engineers and sending them to company facilities outside the country for training. The engineers now have concluded their training and are working on the projects they will bring back to Poland for completion, Mr. Waliszewski says.

The projects include suspension, electrical, electronic, interior, energy and engine management - all areas set to become TCK's expertise. Delphi also recently added software development for multimedia to the facility's to-do list.

TCK engineers will develop high-performance components to provide a smoother, more comfortable ride to vehicle passengers, Delphi says. Virtually all of the engineers at the facility are Polish, and most attended university in Krakow, says Roger E. Hoke, chief engineer, dampers.

This was part of the reason for locating in Poland, and in Krakow in particular. Delphi draws from the five local universities and several outside the city. Four of the engineers have doctorate degrees and all speak English. The majority of the center's workers are right out of college, Mr. Hoke says, noting: "I have a young workforce."

The work force also is low cost, one of the reasons for building in Poland, where workers only make an average $455 per month. Couple that with low operating costs and valuable incentives from the city government and Poland was a very inexpensive place to build, Mr. Hoke says. All this will help Delphi make a profit on its dampers, an area where competitors are willing to cut prices.

Because the facility eventually will be the only Delphi technical center working on shock and strut systems, the components developed here will be used all over the world, including a damper that is being built in Noida, India, and used by Ford of Australia.

Delphi stresses that it did not come to Poland strictly for low-labor costs and cheap exports. The company is committed to the domestic auto market, which is the sixth largest in Europe. "With new car sales, Poland has very dynamic growth," Mr. Waliszewski says, adding that Delphi supplies six Polish car and engine plants with products from its five manufacturing facilities.

Delphi's first plant in Poland was the Jelesnia Packard Electric Systems facility. When Delphi purchased the plant in 1994, there were 250 workers supplying just Fiat. Now the facility has six customers and 1,950 employees. Mr. Waliszewski says the majority of production is going abroad.

The Ostrow plant - a division of Delphi Harrison Thermal Systems - was purchased from the state in 1996 and now builds radiators, heaters and condensers. The supplier had to significantly restructure the plant and introduce lean manufacturing. Among its customers, the plant supplies compressors to Ferrari and for the Lamborghini Diablo.

Delphi's energy and chassis plant in Krosno also was state-owned. The plant builds shock absorbers, gas spring and ball joints and supplies Fiat, Opel and Daewoo and will soon add PSA Peugeot Citroen and Renault SA to its customer list.

Delphi will supply Toyota Motor Corp.'s new Valenciennes, France, plant starting later this year from its Saginaw Steering Systems plant in Tychy. This facility builds halfshafts and steering gears.

Delphi's small Blonie facility supplies canisters to several major automakers including Rover, Fiat, Daewoo, Volvo, Saab and Rolls-Royce. While there are no plans to build any additional plants in Poland, the automaker will optimize its use of existing facilities by adding shifts and products to the lineup.

It will also use Poland as its base for further growth into Eastern Europe. "Delphi Poland is coordinating the East European growth of Delphi" Mr. Waliszewski says, focusing on Hungary, the Czech Republic, Romania and Slovakia as the next strong markets in the region.

"I'm very excited about Eastern Europe," says Delphi Chairman and Chief Executive J.T. Battenberg III. "I think it's going to be a great market over the next decade."