Ford Motor Company may be facing tough challenges in North America, but in Turkey, its operations -- jointly owned by Turkish conglomerate Koç Holding -- remain strong. In 2007, the Turkish Exporters Assembly ranked Ford Otosan the country’s number one exporter; its export revenue totalled $3.4bn and net sales were $6.2bn. “We’ve became the export champion of Turkey,” says Ford Otosan plant manager Haydar Yenigün.
Big producer
The plant, located in Izmit in Kocaeli province and supported by an 11-company supplier park on site and a dedicated pier on the sea of Marmara, produces 320,000 units a year. From here Ford Otosan can quickly and efficiently export commercial vehicles to 65 countries. Its biggest export markets are the UK, Spain, Germany, Italy and France. Recently, the company received word that it would begin exporting to North America.
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Ford Otosan has big goals to become a world player in the automotive industry. “Our vision is to be among the top 10 worldwide in total production,” says Mr Yenigün.
As the Izmit factory uses primarily human labour instead of robotics, its cost structure is about 10% lower than Ford’s other European plants. “We have other competitive advantages: our large-scale export production, a strong distribution network that uses the Ford system and our joint-venture partner support,” adds Mr Yenigün.
The company has keen competition. The main contenders in Turkey are Renault, Tofas, Volkswagen and Hyundai. And the Turkish automotive sector is in a strong position to attract new large-scale export projects in the coming years due to competitive labour costs, production inputs, advanced engineering skills, technological infrastructure, geographic location and zero customs access to the EU market.
But Ford Otosan intends to retain its position. In April 2007, the company opened its Gebze engineering centre to develop the new products and technologies as well as sell its engineering services to overseas countries. Among its main objectives are to standardise the common business practices with local and overseas engineering centres, speed up the development process of engine and transmission systems for the whole Ford family, reduce costs and improve engineering quality.
Recognising strengths
Other major companies are realising Turkey’s advantages. The Coca-Cola Company revealed in June its plans to establish a major operational headquarters in Istanbul. In making the move, the US-based company will consolidate its eastern Europe, Russia, middle Asia, Caucasus, Middle East and Africa centres in Turkey. From Istanbul it plans to run almost two-fifths of its global operations.
According to reports, some 30 top-level executives at Coca-Cola’s operations in Paris and London plan to relocate to the new operation in Istanbul. Several months earlier Muhtar Kent, Coca-Cola’s president and chief operating officer, expressed to a group of business executives in Istanbul that despite some of the regional and global tensions of the past year, “Coca-Cola is absolutely bullish on Turkey. We’ve identified this great market as among our top 22 globally,” he said.
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Shortly after Coca-Cola’s announcement, GE Healthcare revealed plans to move its international operations base to Turkey where it will combine its eastern and Asian markets (EAGM) into a single international diagnostic imaging operation. Units located in central Asia, the Middle East, Africa, Russia and the Commonwealth of Independent States will be consolidated under the GE EAGM and managed from Istanbul.
GE EAGM is aiming to accelerate GE’s growth in equipment and services markets in the region. The EAGM region, which accounted for more than $600m in revenue in 2007, is expected to double this figure to $1.2bn by 2010, due to the new structuring.
Turkey’s 21 free zones are part of the draw for foreign investors. Three are located within the Sea of Marmara region, about one hour from Istanbul. The Gebze Organised Industry Zone (GOSB), located on 402 hectares (ha) in Gebze near the Sea of Marmara, is the highest per capita area in Turkey.
To date, 202 hectares have been developed within the zone for 95 establishments, 33 of which are foreign enterprises. Among its attributes are electricity, water, natural gas, voice-over-internet protocol service, fibre optics, integrated services digital network lines, and security. Corporate executives comment that the zone operates like a municipality. “All companies existing in the zone contribute to its infrastructure costs,” says Güher Türker, GOSB general manager.
Alarko Carrier, co-owned by Alarko Holding and United Technologies Corp (UTC), manufactures heating, ventilation and air conditioning equipment and radiators from its GOSB facility. “The company chose GOSB because of its location next to a highway and seaport,” says Önder Sahin, executive vice-president at Alarko Carrier.
The company also takes advantage of lean production technologies and benefits from a skilled workforce. The company is one of only four establishments in Turkey to hold an SA 8000 social responsibility certification. “Our labour cost for blue-collar workers is about $9 an hour, which is low compared to western Europe but high when compared to India and China,” says Mr Sahin. “But we do not want to compete with low labour costs. We want skilled workers who are productive.”
Developed free zone
German clothing manufacturer Hugo Boss derives advantages from its location in the Aegean Free Zone (AFZ) in Izmir, the first private developed free zone in Turkey, regarded as the nation’s most modern. Izmir is known as the pearl of the Mediterranean and is Turkey’s third largest city and number one seaport.
Managed by ESBAS, AFZ is home to 335 companies that generate more than $3.7bn. Among the ‘soft’ amenities it cites are concert and sports hall, child care centre, medical/dental clinic, antique car museum, and Space Camp Turkey -- the fifth camp of its type in the world.
Most important to AFZ, however, is Izmir’s Ege University, with its department of textile engineering – a key reason why Hugo Boss came to Izmir. “In addition, Izmir is a modern and cosmopolitan city that offers excellent logistics,” says Josef Kline, director of the Hugo Boss women’s and sportswear plant. Hugo Boss manufacturers four brands of womens’ clothing and sportswear at AFZ.
Quality workmanship is important to the upscale clothing manufacturer, especially in a nation that is transforming itself from being a t-shirt manufacturer to a producer of higher-end fashion clothing. Consequently, in 2005, Hugo Boss expanded the facility by opening a centre of operational excellence. The centre focuses on training, quality and leadership skills. “Our goal is to offer a leadership institute here,” says Mr Kline. “Our vision is to be the leading apparel manufacturer in the world.”
Given Turkey’s close proximity to key markets in Europe, an agile workforce and modern facility that uses the most state-of-the-art equipment are important. “We are developing our technology, which we are spreading among our companies,” says Mr Kline.
Attracting major industries
North of Izmir, in the province of Manisa, is the Manisa Chamber of Commerce and Industry Organised Industrial Zone (MCCI OIZ), the second largest industrial zone in Turkey. It has been active since 1968 and has played a key role in transforming the region by attracting major industries. Construction of the 960-hectare zone’s fourth and fifth phases has recently started.
Indesit, the second biggest manufacturer in Europe for white goods, operates a refrigerator plant in the zone. According to Turgay Dag, Indesit plant manager, the biggest advantage for locating in the zone is cost. “The workers here are also dependable,” he says.
Transportation remains Indesit’s biggest challenge, because the company exports largely to Europe. Plans are under way, however, to develop the Mustafakemalpasa and Okçugöl railway stations for use as container warehouses to combine cargo coming from Manisa, Izmir and Denizli and to collect cargo coming from Bursa and Eskisehir. At these stations the containers will be separated according to their destinations and loaded onto block cargo trains that will carry the goods to Vienna, Nürnberg, Cologne, Lyon and Milan.
MCCI OIZ officials estimate that by improving railroad connections to the port, companies would achieve 30% savings.
COUNTRY PROFILE
TURKEY
Population: 72 million
Pop. growth rate: 1.013%
Area: 770,760 sq km
Real GDP growth: 5%
GDP per capita: $12,900
Current account: -$38.03bn
Largest sector (% of GDP): Services 62.8%
Labour force: 23.53 million
Unemployment rate: 9.9%