Mercedes 'Made in Hungary'

The Mercedes assembly plant, operated by Mercedes-Benz Manufacturing Hungary Ltd, in Kecskemét, east central Hungary, began production this spring. the June issue of Diplomacy and Trade carried an interview with the CEO.

“If we had to make the decision again to come to Hungary, we would make exactly the same decision – even in this business environment of 2012. We feel that our industry gets a lot of support to be successful in Hungary. The whole automotive industry in the years to come will have a major impact on the entire economic situation in Hungary.”

These words by the Managing Director (MD) of Mercedes-Benz Manufacturing Hungary Ltd., Frank Klein, reiterate that the Mercedes assembly plant in Kecskemét, East-Central Hungary is a success story. The company announced in June 2008 that it would manufacture its A and B-class models in Hungary. A green-field project of EUR 800 million created the assembly plant that began production at the end of March this year.

In an interview with Diplomacy and Trade, the Managing Director pointed out that “there were certainly a lot of criteria that came into consideration when we chose Kecskemét for our plant. We evaluated more than 15 different locations in Eastern Europe on logistics, finance and the availability of qualified workforce.

The main factor that helped Mercedes-Benz choose Hungary was that we were convinced that in Kecskemét, we would be able to find enough qualified and motivated people to build a plant from scratch. Also, the support by the Hungarian government and the local authorities were very convincing when we started talking to them, and so far, we have not been disappointed.

We have been able to hire the people we need, qualify them, and keep them. And, the support from the Hungarian government and especially from the local authorities in Kecskemét has been outstanding.”

Within less than 12 months, they were able to set up all the buildings, more than 300,000 sq meters of production floor space. Organizing and coordinating all that was certainly a big challenge. “We had more than 2,000 workers here on site to construct the buildings. It was very complex issue – just as is the hiring and qualifying people.

We have sent more than 1,200 Hungarian workers to Germany to qualify them over an average period of three months. We had to set up a lot of things to make this whole project possible and make it successful. So far, things are very positive. We can see the first B-class model made here in Kecskemét. It is such a beautiful car that we decided to keep the first one here,” he points out.

Frank Klein is especially grateful to the local city council who “appointed staff to support us basically 24/7. So, whenever, there is an issue like erecting buildings, creating infrastructure, building new houses for our employees, etc., they are always open to discuss them and are willing to help us.”

Site and workforce built up in parallel

There are currently 300 foreigners working for Mercedes-Benz here, most of them German and European experts, but there are also people from the United States, Brazil, and South Africa. They will stay here for an average of three years. “Our goal is to send them back after a period of 2-3 years and replace them with specialists who are currently being trained here.”

Mercedes-Benz hired people early up front, and thus, had a core team ready early in the project. These Hungarian employees were trained for a longer period of time. Some of them were in Germany for more than a year. Also, the technology experts had to be trained for a long time. “Now, we are at the point that we can use them as trainers, so, now, Hungarian specialists train our new Hungarian employees – a strategy we have followed right from the start,” Klein says.

Currently, 2,500 people work at the Kecskemét plant (a number that is expected to grow to 3,000 by the end of the year), but indirectly, considering all the suppliers, as well as all the support and maintenance people, the MD estimates an additional 1,000 people are working for Mercedes on a daily basis. It is difficult to put into numbers the impact locally, he says, but “directly or indirectly, the plant helps about 10,000 people to make living in the region. Also, the impact is felt in many areas of business. You see new hotels, new gas stations, new roads and new restaurants opening.”

The expats

For the Germans working here, it is experience and adventure at the same time. “All the Germans who made the decision to come here came for the working environment and the incredible experience, because it is certainly not very common to build a plant from scratch. So, we have a lot of highly motivated Germans who decided that they wanted to be part of this incredible experience. A lot of them came with families, with children.

Therefore, it is also a big step from the family perspective. So, we also had to make sure to create an environment in which our German – and Hungarian – employees can concentrate on performing well every day,” says the Managing Director who himself gained international experience when he worked in Portland, Oregon, in the United States in the 1990s.

For the German kids, there are more than a hundred of them, including Klein’s eldest son, the company started its own Mercedes-Benz school teaching kids according to the Baden-Württemberg standard. There are 11 German teachers, contracted by Mercedes-Benz, who were also willing to accept a new challenge to go abroad for three years. “We have two school sites, both of them are part of an existing Hungarian school. This is also important because we do not want to be isolated. It is great to see my kids having Hungarian friends. It is an element that helps bring the two cultures closer to each other,” Frank Klein points out.

Second shift coming up

The plant, whose output this year is roughly 40,000 B-class models, will reach peak production volume (100,000 units annually) in the next few years. After ramping up the press shop, paint shop, body shop, the assembly line and others, the second shift will be added this summer. “Working in two shifts, 16 hours a day, will present new challenges like transportation issues for the employees. We already have most of the workforce in place who – during the summer – get split. Most of the people to work in the second shift are already on board, getting trained, some of them in Germany at this point,” the Managing Director stresses.

Currently, there are 18 companies, with headquarters situated in Hungary, supplying parts for the Mercedes B-Class, but the MD says “we want to increase the number of those suppliers who are established here. I’m confident that more and more Hungarian companies can qualify to meet the requirements of Mercedes-Benz.”

He expects the Hungarian government to continue its industry-friendly policy. “Certainly, we are here to make money, to build a premium product, and we need the government to generate an economic environment where it is good to invest. Education and training are also very important. You cannot only focus on theoretical expertise because you need experts who are willing to work the machines on the assembly line.

I hope we can continue with the dual apprenticeship program that we have started, and I hope that all companies in Hungary will follow this direction because sometimes, it is important to have the necessary political support for such a strategy. It is important not only for Mercedes but also for the entire industry. The dual apprenticeship program, I think, is one of the key elements of Germany’s success story.”

Long-term commitment

He stresses that Mercedes-Benz has a long-term commitment in Hungary, thus, the company needs a political environment on which, Klein says “we can calculate and rely. Of course, when you have changes coming one after the other, that generates an environment where it is difficult to make long-term commitments. We also need transparency and predictability – these are important for every government and every country.”

Frank Klein has been in Hungary since the summer of 2010.  He says his priority is his family. “I have a wonderful wife and three wonderful kids. My personal highlight was the birth of my smallest son here in Kecskemét at the end of February last year. That is certainly something that will tie me to Hungary even when I leave this country: to have a son born in Hungary and having a Hungarian middle name, Gábor.”