Doherty Hungary Sees Healthy Automotive Sector in Hungary
The car making and associated industries are key players in the Hungarian economy. Largely in response to the dynamic automotive sector in Germany, Hungary has benefitted from proximity to its German customer base and the good infrastructure and resources available here, Jim Doherty, CEO of Doherty Hungary Kft., tells the Budapest Business Journal.
The Hungarian automotive sector has attracted numerous companies covering all the various aspects of car manufacturing. Many believe that this versatile landscape has started creating synergies, and as such, these companies can work together more effectively. Doherty Hungary also senses this opportunity.
“This synergy is having a significant impact on our ability to keep business in Hungary. In the first ten years of our life here, we would often be seeking service and support from companies in Western Europe, typically the U.K. and Germany,” CEO Jim Doherty tells the BBJ.
“Now we can find most of what we need — machine tool support, raw materials, oils, tooling, automation, consultancy etc. — in Hungary itself which is, of course, a very positive development compared to the early years of comparative isolation. With these synergies in place, Hungary can move from subcontractor to innovator status,” he adds.
Doherty Hungary Kft., based in Orosháza (197 km southeast of Budapest) has been producing shafts for electric motors in Hungary for 20 years. The original business, which was founded in England, was established in 1934. The company produces more than one million shafts per month (to 4-5 micron tolerances) for its customers in the automotive, home appliances and power tools sectors.
Following the trends in Hungary over the past five years, its fastest growing sector has been automotive. Doherty Hungary has enjoyed on average 10% growth per annum for the last ten years and whilst the automotive sector is now beyond its historical growth cycle, the company head says it is readying itself for a bigger drive towards e-mobility.
The importance of the automotive sector as the main engine for Hungary’s industrial output is well reflected by the figures. In the past years, many times hiccups in the sector have caused a slowing of overall industrial output. Production volume of the sector declined 9.5% year-on-year in September, while total industrial output was down 0.6%, a detailed second reading of monthly data released by the Central Statistical Office (KSH) showed.
Problem vs. Opportunity
According to Doherty, this dependence can be seen both as an issue and as an opportunity. “The automotive sector has gone well beyond its typical cycle of growth and then retraction and the move away from dirty diesel to clean electric is still at a very disruptive stage. So in that case it’s a problem, because so much of Hungary’s GDP and manufacturing sector is committed to automotive,” Doherty says.
“The consensus at the moment is that schedules are slowing but we are still at the stage where that is a relief from an overheated market rather than having to cut shifts due to significant reductions in demand. The opportunity comes when we start to really innovate. A change in customer requirement means we all have to think about new products and processes and innovative ways of managing cost. With such a large proportion of manufacturing being automotive, we have the breadth and depth of support services and business partners in Hungary to become more innovative and rise up the value chain,” he adds.
As such, the sector sees crucial attention, and further expansion is highly beneficial for the national economy.
Although Hungary now operates from a far higher baseline, last year’s significant expansions by Daimler and the announcement of the BMW factory coming to Debrecen show that there is still capacity for the market to grow further.
“The key to all this expansion is training and development, because all the available labor has now been recruited,” Doherty says, it was has becomes a familiar refrain for virtually all business fields in Hungary.
“The Germans, again, are particularly good at taking a long-term view of business development and that, mostly, means people development. The understanding in Hungary now that dual education is part of all of our growth plans is a really positive change in mindset. The rather negative alternative to training and development is that the employers chase the same people, drive wages up but get no skill or productivity improvement for the additional cost,” he points out.
“So the expansion question is really based on people and training, and possibly the return of Hungarians who moved abroad when there was less opportunity at home,” Doherty says.
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