Apollo Drops Hungarian Factory Plans

A question mark now hangs over Apollo Tyres’ future direction in Hungary following the company’s decision to withdraw its application to establish a facility in the city of Gyöngyös. Apollo planned to build a greenfield operation to house its European Manufacturing and High Technology Centre, however delays and local opposition has dampened the company’s enthusiasm for the project. This news comes barely a fortnight after Apollo admitted production at the facility would not feasibly begin before 2010 because of hold-ups in the land acquisition and regulatory clearance process.

“The decision follows unexpected delays in administrative processes required for the start of the euro 200 million greenfield investment,” says Apollo Tyres in a statement. “It also pre-empts a potentially divisive referendum on the investment for the local community.”

The Budapest based BBJ business weekly says that the organiser of a referendum against the factory, the local right-wing opposition Fidesz party, claims its opposition stems from environmental concern. Fidesz considers the region to be already overburdened with heavy industry and unable to cope with another source of pollution.

“As a socially responsive organisation, and one that lays great store by family and community values, Apollo Tyres does not wish to be the cause of any such division or disharmony among the population of Gyöngyös,” states Apollo. The company believes the referendum seeks to block its investment “on grounds that has nothing to do with the reality of modern tyre manufacturing practices and standards adhered to by Apollo Tyres.” The tyremaker adds that “the manufacturing and product technology Apollo Tyres uses is in full compliance with all environmental norms and statutory requirements in each of the markets it operates in.”

Apollo also notes that its environmental standards are audited and governed by regulations of the International Finance Corporation, a World Bank organisation. Furthermore, its products are E certified and the company is already compliant with most proposed European Commission changes timetabled to be implemented by 2010.

In terms of financial cost to the company, Apollo admits its decision “might have a short term financial and resource allocation impact on Apollo Tyres.” Since the Gyöngyös site was chosen the company has set up a Hungarian subsidiary, added an Information Office in the city and initiated the necessary proceedings in order to receive administrative clearance for its planned investment. Yet Apollo does not doubt the costs associated with cancelling its plans are justifiable, and claims it “is very clear that this decision needs to be taken to speed up the process of setting up our facility, and in the long term interests of the community we will be working with.”

Gyöngyös mayor György Hiesz believes that politics, not environmental issues, were behind the referendum. He said he hoped Apollo would at least pick another city in Hungary for the plant rather than take the investment to another country, and indeed the company may not be short of potential suitors – the announcement was only hours old when the mayor of Polgar, in the east of Hungary, welcomed Apollo to site its factory in his town – “Located along motorway M3, Polgar and its industrial park would offer excellent basic infrastructure and a 50-hectare area to the project,” the mayor told Hungary’s MTI news agency on August 15. At this stage the company has asked the Hungarian Investment and Trade Development Agency to identify alternate locations within Hungary for the facility, however the option to bypass the country altogether remains – Apollo says it will also be “exploring suitable alternative locations elsewhere in Europe.”

“Apollo Tyres remains committed to producing the best tyres for our European customers, using the best available technologies, in the most environmentally friendly manner,” the company’s statement regarding the decision concludes. “It also remains committed to operating with communities which are best positioned to truly appreciate the benefits of this investment and support the development of the community along with that of the company.”