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Romania: Auto Industry Enjoys Success

Bucharest, 23 January 1998 (RFE/RL) -- Despite Romania's economic and political troubles, the country's auto industry is fighting hard to ensure its future, and with some success.

The major domestic manufacturers are Dacia, based in Pitesti, northwest of Bucharest, and Daewoo, of the southern town of Kraiova. In comments to RFE/RL this week, spokesmen for both companies exuded optimism, despite difficult conditions.

Dacia had its origins in the Communist era and its outdated cars, based on an ancient Renault design, have been a familiar sight puttering around the roads of East and Central Europe for years. By contrast Daewoo is an ultra-modern offspring of what was the South Korean economic miracle. Of the world's car-makers, Daewoo has probably staked most on the growth of the car market across the eastern transition states.

Dacia continues to hold a dominating place in Romania's domestic market, where its low prices have ensured a continued ready acceptance among Romanian buyers, despite its dated design. But the company had a hard year last year as the austerity program introduced by the reform-minded government of Prime Minister Victor Ciorbea bit deep into local purchasing power. Higher purchase taxes and fuel prices also helped depress sales. But Dacia, having gained experience in an earlier crisis in 1991-92, reacted quickly with cost cutting measures and a new focus on modernization, exports and also on finding a wealthy partner for the future.

By autumn long-term prospects improved with the signing of an agreement with South Korea's premier car maker Hyundai to produce 50,000 Hyundais annually from the Dacia plant, starting by early 1999. The modern assembly line will be set up this year with the help of a $2.4 million low-interest loan provided just last week by the Romanian government.

Apart from the financial gain of the Hyundai contract, it will allow Dacia to gain invaluable experience of high quality-control in production processes in that the South Koreans, like the Japanese, are very meticulous in this area.

Dacia spokesman Nicolae Badiu says that the government has also just granted an even bigger credit -- some $3.6 million -- for development of a brand new model, code-named the D33, which will be aimed for sale on the sophisticated West European markets. Badiu said the car is being designed by the Italian design consultantcy IDEA, and will be powered by an engine from a leading international manufacturer.

Dacia has also sharpened its export orientation, both with the old model and a newer model, called the Nova. In the next three years some 50,000 vehicles will go to China, as the result of a deal signed in Beijing during a visit by President Emil Constantinescu.

The Nova, which suffered some initial troubles after introduction, has been redesigned and will be marketed more aggressively on overseas markets, including Egypt and Turkey, as well as Latin American countries like Venezuela and Argentina. For the main Western markets, the Nova will be further upgraded by the fitting of Peugeot-designed engines capable of conforming to strict pollution emission laws.

Dead, the other major manufacturer in Romania, has already invested $800 million in its plant and related facilities. Public relations chief RDA Andrea says the severe financial crisis in South Korea, which has affected all that country's big industrial companies, will not lessen Deal's commitment to Romania. Dead has maximized its presence in the emerging markets, having plants also in Poland, the Czech Republic, and.

In Romania, it produced a total of 38,000 cars last year, and plans to raise this to 46,000 units in 1998. Like Dacca, the company is planning an export thrust, with production from Romania earmarked for Slovene, Croat, Hungary, Bulgaria, the Czech Republic, as well Poland and Russia, and also to several Latin American countries.