• New facility will manufacture components primarily for Airbus
• The investment will be used as an argument in the ongoing disputes between Bulgaria an Airbus over an offset agreement.
Against a backdrop of falling foreign investment in Bulgaria, a ray of hope comes from France's Latecoere, a leading manufacturer of aerostructures and interconnection systems. The French company is currently commencing construction of a production plant for aircraft components near the Bulgarian city of Plovdiv. Latecoere has been serving the aircraft industry for a full century and is presently major player in the global aeronautics industry with customers including Airbus, Boeing, Embraer and Bombardier.
The manufacturing facility in Plovdiv will work mostly for Airbus, the largest passenger jet airliner manufacturer. The plant represents a 15 million euro investment which, although massive in itself, it will not serve to reverse a trend of dwindling foreign investment. However, the investment will place Bulgaria on the list of countries producing aircraft components, in parallel with the country's emergence as a growing location for factories producing automotive components.
Production by March
Latecoere's new manufacturing plant is expected to commence production by the end of March, 2018. , It is the first plant in the vicinity of Plovdiv that will manufacture components for the international aircraft industry. As such it follows in the footsteps of the US-based aircraft components manufacturer Woodward, who maintain a plant in Sofia.
Latecoere specializes in aerostructures (aircraft doors and fuselage sections), which generate approximately two-thirds of the company's turnover, and interconnection systems (wiring systems, avionics racks and on-board equipment). Latecoere distributes it interconnection systems under the brand name LATelec.
The Plovdiv facility will manufacture components for aerostructures and interconnection systems but not finished end products. "In particular, the plant will make aircraft door assemblies for Airbus A320 and A330 and avionics racks without the cables and the electronic equipment," Latecoere's chief operating officer, Thierry Mootz, told Capital newspaper.
Latecoere's planned investment of 15 million euro will be made over three years, with 11 million euro of it to be invested immediately. Two hundred people, mostly factory workers, will be recruited over the next year and a half. The company has already started looking for personnel and is prepared for a possible shortage of staff.
"We have talked to French colleagues here (in Bulgaria) and are aware that finding people may turn out to be a challenge," Mootz said.The French group is not uncomfortable with a potential shortage of workforce because it has an idea to expand its production activities at the site in the future. To this end, a vacant plot of land has been secured for the construct of future facilities. Mootz indicated that future expansion would depend on the growth of the business and Latecoere's relations with its main customer, Airbus. The French Ambassador to Bulgaria, Eric Lebedel, also highlighted the link between the two companies, probably to reiterate that the future expansion of the plants depends on the relations between Bulgaria and Airbus (see the sidebar).
Price factor
Latecoere's decision to invest in Bulgaria was the result of a three-year search. The company's approach is to locate its manufacturing facilities in proximity to its customers. Latecoere's facilities that manufacture components for Boeing, for example, are located mostly in North America, The company's plants supplying parts for Airbus are located in Europe and North America, and it's factory in Brazil works exclusively for the Brazil's airline manufacturer Embraer. Thus, potential locations considered for the new production plant included, in addition to Bulgaria, Portugal, Moldova and Romania, as well as North Africa (Latecoere already has plants in Tunisia and Morocco). Based on geopolitical risk, the list of potential locations was subsequently cut largely due to its low labor costs.
Last year, Latecoere approved two major green-field investments: a 25 million euro investment in a new fourth-generation production site at Toulouse planned to accelerate the company's digitalization, and the 15 million euro investment in the Plovdiv plant, focused on lowering production costs. "We consider that the first project will help enhance our competitiveness through automation and the second - through best expenditures," Mootz said. He also noted, however, that he does not expect Bulgaria to remain a low-cost country over the next 20 years. "The salaries will grow but we believe that step by step we can begin enhancing people's competences and introduce more technologies in the products," he added.
An arbitrage driven investment?
Latecoere's investment in the new manufacturing facility may provide a solution to Bulgaria's arbitration saga related to the purchase of 18 Cougar and Panther military helicopters from Eurocopter (now a part of Airbus) in 2006. Under the deal, the French company (now Airbus Helicopters) committed to make offset investments in Bulgaria that have not been made so far. In turn, Bulgaria refused to accept and pay for all helicopters ordered. This led to arbitration cases launched by both sides. The investment of Latecoere in a plant that will work for Airbus might serve as part of the solution to the problem. The matter was discussed during a visit of French President Emmanuel Macron to Bulgaria at the end of August. The French Ambassador to Bulgaria, Eric Lebedel, hinted at the official start of construction at the Plovdiv site, that the end of the arbitration proceedings could lead to more orders and extension of the Bulgarian plant.• New facility will manufacture components primarily for Airbus
• The investment will be used as an argument in the ongoing disputes between Bulgaria an Airbus over an offset agreement.
