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Electrolux Searching for Local Suppliers for Russia Plant
Feb 7, 2005
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Swedish manufacturer Electrolux will not invest in its second factory in the Northwest region of Russia until it can find enough parts producers locally to make the project worthwhile, Nicholas David, general director of Electrolux St. Petersburg, said.

The share of locally manufactured washing-machine parts needs to increase dramatically before Electrolux will expand production in Russia, Mr. David told 80 local manufacturers at a St. Petersburg Chamber of Commerce meeting organized by city officials.

"Future investment will depend on the success of the first plant. And the key to success is finding local components," Mr. David said.

Consumer appliances maker Electrolux plans to invest 60 million euros (approx. U.S. $78 million) into building the second plant, but has yet to decide between a Leningrad Oblast or a St. Petersburg location. Local content needs to make up more than 41 percent of the total parts before the company can make a favorable decision regarding the investment, Mr. David said.

Electrolux's first 9-million euro washing machine factory will open in St. Petersburg this summer. The company was able to secure 11 local suppliers to produce more than 20 percent of the parts, but it says even a 50-percent share of locally produced parts by 2007 is not ambitious enough.

"I insist that we have a plan to dramatically increase the local content," said Jean-Michel Paulange, the company's senior vice president.

Securing local production has been a top priority for all international manufacturers operating in the St. Petersburg region. It minimizes storage, production, import, and logistics costs. Thus, the availability of qualified manufacturers in the region plays a key role in increasing a region's attractiveness to investors, something city officials say they have kept in mind.

"The city is prepared to offer tax breaks and the territory for Electrolux's future plant, but we hope for your ability to supply the component parts," said Vladimir Blank, head of the city's economic development committee, to representatives of local parts producers at the meeting.

Last week, Mr. Blank said City Hall plans to spend 1.9 billion rubles (approx. $69 million) on a program to improve the potential for the city's industrial development.

The reaction from local manufactures proved quite meek, with industrial development yet to meet the levels sought by international manufacturers. In their turn, local producers named tough quality requirements, the lack of logistics, and mass-production structure as the factors impeding production.

Electrolux management remained optimistic of meeting their goals.

"We need very simple things to be met and we hope to find the companies that are able to do that," Mr. David said.

Electrolux is also teaming up with management of Russia's Ford plant in Vsevolozhsk, which has 23 local suppliers, on production coordination projects, he said. (St. Petersburg Times)

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