Kia, Kraft Suffer in East Europe as Exports Backfire

[Joanne98]

Feb. 16 (Bloomberg) -- Eastern Europe’s past is the Iron Curtain. The next year may resemble the Rust Belt.

Companies from Kia Motors Corp. and Kraft Foods Inc. to Bulgarian fertilizer producer Neochim AD are curtailing production or idling workers, throwing economies that tied their fortunes to western capitalism into a tailspin.

“Nobody thought it would be like this,” says Dusan Dvorak, the spokesman for Kia’s two-year-old plant in northeastern Slovakia, which has cut the hours for its 2,700 workers by 25 percent.

As Europe’s contraction engulfs former Soviet-bloc nations, governments are forced to shore up economies built on a now- teetering model: creating an eastern factory floor with cheap labor and land to feed western consumption. Leaders in the Czech Republic, Hungary and Poland are drawing up crisis plans. Angry workers have rioted in Bulgaria and the Baltic states.

“The question is to what extent the current model is sustainable,” says Rafal Kierzenkowski, an economist with the Paris-based Organization for Economic Cooperation and Development. “What we are observing is a kind of backfiring.”

http://www.bloomberg.com/apps/news?pid=20601085&sid=aGTegIUoc.e4&refer=europe