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NINETY EIGHT REGENCY

GM to boost Opel/Vauxhall engine output at Hungary plant

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GM to boost Opel/Vauxhall engine output at Hungary plant

September 21, 2010 12:31 CET

UPDATED: Sept. 21 15:35 CET

BUDAPEST (Reuters) -- General Motors Co. will invest 500 million euros ($655 million) to expand capacity at its Opel/Vauxhall engine factory in Hungary, where it will produce three new engine lines starting in 2012.

"At full capacity, the plant has an output of 500,000 units annually," GM said Tuesday. "The new plant will offer 800 jobs."

The plant will reach full capacity by 2015.

Analysts said the GM announcement on Tuesday is positive for investors holding Hungarian assets and Hungary, which has been a laggard in foreign direct investment (FDI) flows in recent years.

Cars and car parts are a key component of exports and industrial production in Hungary and other central European emerging economies, but the industry took a big hit in the global crisis and scaled back production in many places.

Foreign direct investment inflows in central Europe have fallen since 2008. Aside from GM's expansion, the only other big project in Hungary is Daimler AG's new 800 million euro car assembly plant, which will employ 2,500 workers in the central Hungarian town of Kecskemet starting in 2012.

"I won't say that our fate and the fate of the auto industry is one and the same, but it is clearly visible that the economic cycles (of the two) are interconnected," Hungarian Prime Minister Viktor Orban told a news conference.

"I think the present investment of Opel heralds the coming successes of the Hungarian economy."

The country's economy is struggling to recover from a deep recession last year and stagnation this year.

Orban also said on Tuesday that the government would subsidize the GM investment and specify the details of the support in a contract that he said the government and GM would finalize by mid-October.

"Political support on both the national and local level has provided excellent conditions for our production here, and we will continue to rely on that support in the years to come," said Reinald Hoben, Opel/Vauxhall vice president of manufacturing. "Another important location factor is the very good qualifications, the high degree of motivation and the high standard of education of our Hungarian work force."

Orban said the state expects the resulting economic upswing to return the subsidy within four years, adding that GM is expected to produce engines in Hungary for at least another 20 years.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100921/ANE/309219979/1198#ixzz10B1I9Lkg

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