Trzic, 10 May (STA) - The Trzic-based cable harness manufacturer Cablex will launch production in China in June, while also planning to open a plant in Serbia to supply the Russian market. General manager Zdenko Kopriva says the reason to open Cablex Electronics ltd in Xuzhou is not cheap labour force, but market potentials there.
Set up by five partners, Cablex started off with seven workers over 20 years years ago. Cablex Group today employs nearly 1,000 people in six production facilities throughout Europe, supplying home appliance and automotive manufactures.
"We wanted to create a company, reckoning it would be best to join a global production trend or cluster, production of a product that many industries use. Cable confection is needed in all electric gadgets in white goods, cars, aircraft, coffee grinders."
Kopriva says the company has never been in the red as it has always adjusted costs to what it can sell. The company initially moved abroad mainly due to lower labour costs, now it is following its customers.
"Our sector is extremely cost-compact... Battles are fought over every cost item and everything is subordinated to that. Our products are cheap as a whole, components are only worth a few cents of tens of cents."
Kopriva explains how the industry first moved from developed parts of western Europe to Spain, Portugal and Slovenia, then in pursuit of ever lower costs to Poland and Slovakia, and on to Serbia, Ukraine, Turkey, Tunisia. "Now this is too costly too and I don't know whether we'll go to Mars to make production cheaper."
He admits it makes for a tragic story and is not always happy with how the things are, but "if we resisted production in cheaper places, no one would buy from us and we'd be forced to close down".
However, lower labour costs are not the reason for going to China now. "The location is so remote and specific that other costs would increase too much. The logistics would also take too long to import back to Europe."
"Most European producers - BSH, Electrolux, Candy - have realised China's powerful market potential...We may decide not to follow these trends, but we'll be left out in a few years. But if BSH puts out more white goods in China than Europe and we supply 30-35% of its European needs, this will then only mean 15% in the concern."
Kopriva says that the customers also encourage Cablex to follow them in China due its technological advancement. Most of the production there is based on traditional technique, while Cablex uses more advanced technology that allows for a cheaper, faster and better product.
Cablex, which employs about a half of its 1,000 work force in Slovenia, generated about EUR 60m in sales revenues in 2008, which fell to EUR 58m in 2009 and then returned to EUR 60m. This year the group planes sales of EUR 62-63m.
The group is founding a company in Serbia to supply the Russian market. "The EU export tax to Russia is 20%, while Serbia is exempt, which is why it's worthwhile to use this advantage. There are also local potentials in Serbia, such as Slovenian company Gorenje opening two plants there, and there may be some new orders in Romania and Bulgaria."