From: trevor_easton at dofasco.ca Date: Tue, 26 Oct 1999 08:14:45 -0400 Subject: Move over LADA, Move over KGB, CKD has landed
KALININGRAD, Russia, Reuters [WN] via NewsEdge Corporation: Sleek BMW limousines and rugged Land Rovers began rolling off an assembly line at the weekend in Russia's Kaliningrad region as a local producer made a $150 million second try to produce foreign cars at home.
Russian Avtotor and Germany's BMW Group
Baltic Sea enclave with historic ties to Germany will overcome the economic difficulties that have caused similar partnerships to falter or fail.
"The BMW Group believes in the Russian market...even though the country is currently going through difficult times," Heinrich Heitman, a member of BMW's management, told reporters.
Both sides are relying on Kaliningrad's status as a special economic zone which allows the import of auto parts and related equipment with no customs duties.
Kaliningrad, Russia's westernmost territory, was once known as Koenigsberg, part of Germany's East Prussia province, seized by Soviet troops at the end of World War Two and its German inhabitants largely expelled.
Sandwiched between Poland and the Baltic state of Lithuania, it boasts European Russia's only year-round port.
Avtotor, based in Kaliningrad, is aware of the risks, having seen its assembly of South Korean Kia automobiles grind to a near-halt after successive financial crises in Asia and Russia.
The plant is housed in a converted factory complex at the Yantar, or Amber shipyards -- named for the yellow fossilised tree resin mined in the region and used for jewellery.
PRODUCTION TO START OFF MODESTLY
Production is to start off modestly, with next year's output set at just 3,500 vehicles. Avtotor is hoping to reach maximum output of 10,000 cars annually within three to four years.
Both sides believe they can sell luxury cars in a largely impoverished country by securing contracts from state organisations -- Avtotor says the administration of President Boris Yeltsin has already promised to buy 250 BMWs.
They are also hoping that buyers at the top end of the automobile market have been less affected by financial crisis.
Duty-free status means BMWs and Land Rovers assembled from kits in Kaliningrad will be exempt from an import duty of about 60 percent, which BMW says translates into sticker prices 15-20 percent below imports that are already constructed.
BMW is limiting its involvement to supplying kits and monitoring production quality while Avtotor plans to invest $150 million over five years.
Avtotor Chairman Vladimir Shcherbakov saw nothing wrong with the arrangement. "It's my country and so I should be the first to suffer any risk," he told journalists.
The BMW venture is one of just a few to get off to a successful start. The crisis forced delays in Russia plans by other major automakers including U.S. Ford F.N, French Renault RENA.PA and Italian Fiat FIA.MI. ((Moscow Newsroom, moscow.newsroom at reuters.com)) REUTERS