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Romania: France's Renault Has Ambitious Plans For Dacia

Romania's ailing carmaker, Dacia, was thrown a lifeline 18 months ago when it was bought by France's Renault, one of the automobile industry's major manufacturers. Despite the country's economic troubles, Dacia's future now looks promising, with Renault having pledged a $220 million investment and pushing ahead with plans to launch a new model -- a Western-quality car at Eastern European prices. RFE/RL correspondent Eugen Tomiuc reports:

Prague, 13 March 2001 (RFE/RL) -- A year and a half after its privatization, Romanian carmaker Dacia (Dacia is the ancient name of Romania) is showing the first signs of recovery. Both production and sales have grown in the first two months of this year. The company is also planning to expand into other markets with an ambitious project -- a car built at high-quality standards calculated to cost as little $4,800 (or 5,000 euros).

Dacia's recovery began after the troubled, state-owned carmaker was purchased by the French company Renault, one of the world's top 10 automobile producers. In September 1999, Renault bought an initial 51 percent of Dacia for $50 million and a pledge to invest some $220 million over the next five years. At present, after two subsequent stock acquisitions, Renault owns about 80 percent of Dacia.

Because Dacia was restructured after its privatization, production at first dropped dramatically -- from almost 90,000 cars a year in 1999 to less than 50,000 last year. But in October, the company launched its first upgraded model, the Dacia SupeRNova, at about the same price as the original car -- some $4,000 -- and both production and sales have begun to recover in the past few months.

Dacia is by far the local market leader. More than two-thirds (about 70 percent) of Romania's estimated 3 million cars on the road are Dacias. The country's only other local competitor -- the Romanian subsidiary of the South Korean firm Daewoo -- is producing more expensive cars and has serious troubles because of growing financial difficulties experienced by its mother company.

But the French company has bigger plans for its Romanian subsidiary. In 1999, Renault Chairman Louis Schweitzer first announced that the newly acquired Dacia was to become the group's second brand name -- under which it would produce a high-quality vehicle at an estimated price of $4,800. The new car will target not only the Romanian market but also other lower-income countries in Eastern Europe and elsewhere.

Constantin Stroe, Dacia's general manager, tells our correspondent that the car will be launched in three years.

"Our goal is to launch the 5,000-euro car some time at the beginning of 2004. This car will target the population with a limited purchasing power -- the biggest part of the world population."

The new vehicle is being developed at Renault's research center in Paris under strict secrecy. Stroe says it will be a versatile car, ready to meet a wide array of needs.

"This will be a car with a surprisingly high multi-purpose capacity. Buyers in the developing countries need an all-purpose vehicle, since they can not afford a car for shopping, one for holidays, one for work and so on."

But some analysts say it will be difficult -- if not impossible -- to build a high-quality car for a retail price as low as 5,000 euros. They point out that many parts will have to be produced locally both at internationally acceptable standards and at low cost. Dan Vardie, editor in chief of one of Romania's top auto magazines, says Renault itself has acknowledged that the goal is achievable only under very strict conditions.

"Even Manuel Gomez (president of Dacia's board of directors and one of Renault's senior vice-presidents) admitted that the 5,000-euro price is more of a mythical figure than a real one. Gomez stressed it could only become reality provided a large amount of the components for the new car is produced locally, with acceptable quality."

But Stroe says that if somebody can do it, then it is Dacia.

Romania's oldest and biggest carmaker, Dacia has long been considered the flagship of the country's economy. Dacia's history goes back 35 years and for much of that time it has had a connection with Renault.

In 1966, amid a then unprecedented opening to the West, the communist regime turned to Romania's traditional friend, France, for help in building a cheap car for the Romanian market. Two years later, the first Dacia cars under Renault license came off a new assembly line near Pitesti, some 100 km west of Bucharest. In 1969, a new model based on the more modern Renault 12 -- the Dacia 1300 -- was launched. When the license agreement expired in 1978, the car continued to be produced 100 percent locally.

For more than 20 years, Dacia was one of the communist regime's major exports to other Eastern-bloc countries. Even now, old Dacias can still occasionally be spotted on Hungarian, Czech, or eastern German roads.

But with the collapse of communism and with it the regulated Eastern-bloc market, the relatively successful story of Dacia ended abruptly. Faced with tough competition, it rapidly lost its foreign markets and began experiencing difficulties at home.

Even so, the factory kept on producing after 1989, despite years of economic stagnation and deepening poverty. In 1998, Dacia reached the two-million production mark. But while still making a meager profit on paper, Dacia was clearly in bad shape and in need of fresh investment.

In 1999, when Renault stepped in, the French company's interest was more practical than sentimental. Renault saw in Dacia's skilled workforce and low wages a good combination for future success in emerging markets.

While Dacia's first signs of recovery are recent, Renault's future plans are quite ambitious. Stroe says that by 2010, Renault plans to build 750,000 cars annually under the Dacia brand name -- both in Romania and elsewhere.

Marius Carp, director of Romania's main vehicle producers and importers' association, says that at this year's motor show in the U.S. city of Detroit, Renault announced it will start building Dacia cars in Russia in 2002.

"The first location already confirmed by Renault is their plant in Moscow, where they are supposed to start assembling Dacias next year, bringing the total number of Dacia cars to an estimated 200,000 per year in 2004-2005."

Carp says the Dacia will replace the Renault Megane and Clio models currently under production in Moscow. Both cars have proved to be too expensive for cash-strapped Russians. Renault is hoping its new, Russian-assembled Dacia will attract more customers.