Going With the Wind--Russia, Philippines, other emerging countries beckon

Okay, much of Asia has lost its luster, Brazil has been stunned temporarily, and India's potential seems to have been a bit overestimated. That doesn't mean for a second that automakers have given up on exploring new worlds. They've just changed their itinerary and set sail in new directions. Now more attention is being focused on the potential of the Philippines, Eastern Europe, Russia and other areas. And of course, they want suppliers to follow.

Although it has cut back in areas such as Thailand, Ford Motor Co. recently announced plans to build an integrated car assembly, engine and parts manufacturing facility in the Philippines south of Manilla. By 1999, Ford plans to produce extended-cab Ranger pickups, Econovans and Lasers. Major Ford suppliers such as TRW Inc. already are attending meetings there to evaluate the market and the automaker's requirements, says Frank P. Boccabella, vice president and general manager -TRW Linkage & Suspension Systems.

The Motor & Equipment Manufacturers Assn., a supplier trade group, spent a week in the Philippines in late April to discuss trade opportunities with government and industry officials.

Some U.S. suppliers already are well established in the Philippines, using it as a low-cost manufacturing base for labor-intensive products such as wiring harnesses. UT Automotive, for instance, has been making wiring harnesses in Cebu for nearly a decade and is opening a $5 million technology center in the Philippines.

While the Philippines may show great potential, it is not immune to the "Asian flu" sweeping through the regional economies. Car sales there dropped 52% in February from year-ago, to 3,659 units.

In Russia, the former Soviet Union and Central Europe, the fall of communism in the early 1990s and the acceptance of capitalism, as well as the availability of low-cost labor, has sparked great interest.

General Motors Corp. eyes the former Soviet states of Armenia and Georgia as well as Russia for a joint venture. Volkswagen AG is considering building an engine plant in Poland and a car seat plant. Ford is looking at Hungary and the Czech Republic to build a new plant for high-volume cars.

Ford opened an assembly plant in Belarus and is considering other plants in Russia. Just recently, Ford landed the first big contract for the assembly plant to supply 1,500 Transit minibuses for Moscow.

Suppliers also are eager to invest in the region, especially Poland.

Dana Corp.'s Wix Filtration Products Div. is establishing a joint venture with a company in Gostyn, Poland, to make filters. Federal-Mogul Corp. is acquiring Bimet SA in Gdansk, a maker of engine bearings and bushings. UT Automotive is opening a new plant in Poland to make wiring harnesses.

So far, the numbers look good. Sales of new cars continued to rise in Central and Eastern European countries in 1997. In Poland, new car sales climbed 27.5% to 477,980 units. Automotive production increased 20% in the former Soviet Union and 22% in Eastern Europe in 1997, and sizable production gains are expected this year.

Russia is attracting attention because it has only 81 cars per 1,000 people, and analysts forecast the market should boom in the next 10 years, touching 15 million in 2005 .

The Russian government has said the auto industry will be the key to rebuilding the economy of Russia. "One job in this industry creates six jobs in other parts of the industry," says Alexander A. Danilov, counselor- economic affairs, Embassy of Russia.

"We open the door for the creation of production," he adds. The automotive market is too important to the Russian government and the Russian economy to let it die, Mr. Danilov adds.