"The Volyn Klondike"

According to unofficial data, the largest number of Ukrainian citizens become owners of passenger cars specifically in Volyn. Not because there is an automobile plant of its own operating in Lutsk. Not only because the largest car market in Western Ukraine operates here, where one can purchase prestigious foreign cars at prices 10-15% cheaper than usual, which is why buyers come here even from the central and eastern regions of Ukraine.

Cars purchased in Volyn are cheaper for one reason — because of proximity to the borders of Poland and Belarus. For the same reason, the region has acquired the sad reputation of being the Ukrainian fiefdom for the illegal legalization of foreign cars imported from abroad. This phenomenon was "christened" as the "Volyn Klondike." Motorists, law enforcement officers, as well as regular visitors to internet sites know about the "Volyn Klondike," probably throughout the whole world. Both Ukrainian and Russian criminal groups tried to establish control over this "business." Multi-million fortunes have shortened the lives of more than one hundred people.

On June 17, the Main Directorate of the Ministry of Internal Affairs in the Volyn region discovered another organized criminal group engaged in the smuggling and illegal legalization of cars in Ukraine. Based on this fact, the regional prosecutor's office opened criminal cases against former heads, as well as current officials of the Kamin-Kashyrskyi and Liuboml MREV of the State Traffic Inspectorate, and the prosecutor's office of the city of Lutsk opened criminal cases against officials of the Lutsk MREV.

From January to June 2004, the then heads of the Kamin-Kashyrskyi and Liuboml MREV, acting in the interests of third parties, facilitated the illegal registration of 53 foreign cars imported from abroad. This led to the non-payment of mandatory fees amounting to 6 million 521 thousand hryvnias. It turned out that detained employees of the Volyn customs offices and the Border Service were also involved in these dealings.

At a press conference on July 14, 2005, the prosecutor of the Volyn region, Andrii Hil, cited the following facts: "Currently, the investigative prosecutor's office is handling 13 criminal cases relating to facts of illegal legalization of transport on the territory of the region. As a result of a recent inspection by the city prosecutor's office at the Lutsk MREV, facts of illegal legalization in August 2004 of 17 "Toyota-Lexus" cars, manufactured in 2003-2004, were discovered. The losses from non-payment of fees amount to 1.7 million hryvnias. In the remaining criminal cases, painstaking work was carried out together with officers of the Department for Combating Organized Crime. On June 13, 2005, we detained 4 heads of MREVs and inspectors, and criminal cases were opened against seven customs employees."

The head of the Volyn Regional State Administration, Volodymyr Bondar, also has his own view on the problem: "I take a principled stance on yet another issue — we must stop car smuggling. Then our production will have the opportunity to develop, and we will buy either these cars or foreign cars, which are an order, ten orders of magnitude more expensive. And here we must precisely ensure the development of our own producer. Therefore, if we have the funds to purchase cars, we will buy from our own producer. That is how it was done before — all these VAZ models that are present in the motor pool of the regional council, I think, were purchased precisely from our producer. All the more so because it is economically beneficial; their prices are quite acceptable. But the problem exists, and we are aware that we must solve it."

The "Volyn Klondike" is a significant obstacle to the development of domestic automobile manufacturing; not only the abstract state with its specific prosecutor and governor is interested in eradicating this phenomenon, but also the Lutsk Automobile Plant, which intends to conquer the domestic car market.

The "Bohdan" Project — a Ukrainian Bus

On May 24, the Ukrainian public was officially informed about the creation of the "Bohdan" corporation, whose main goal is the coordination and management of the production, commercial, and service activities of the enterprises that are part of it. One of the enterprises of the corporation was JSC "Lutsk Automobile Plant." The development prospect for LuAZ is the creation of production capacities for the output of 6 thousand small, medium, large, and extra-large buses. The production of trolleybuses is also planned here. Investments in the development of bus and trolleybus production at LuAZ will amount to more than 40 million US dollars.

The organization of bus production in Lutsk will allow the plant to preserve its profile and provide employment for about 4 thousand workers. The first buses at the enterprise will be assembled as early as the end of December of the current year — in January 2006. Reaching design capacity is planned for the end of 2007 — beginning of 2008. Production volumes will reach 1.2-1.5 billion hryvnias, and revenues to the local budget will almost triple.

The enterprise development project envisages significant allocations for the development of modern technologies; modern technological equipment will be purchased and installed. Taken together, this will allow a substantial change in the situation with the training of specialists in secondary and higher educational institutions, raise the level of their training, and provide jobs.

Experts forecast that the implementation of the project will be of great importance both for the development of related industries in the city and region, and for the creation of additional jobs in the household and service sector.

The "VAZ" Project — Russian Expansion

Literally just a few days ago, the Lutsk Automobile Plant began large-unit assembly of a new model — the VAZ-2110, whose design and finish strongly resemble prestigious foreign cars.

On July 14, 2005, celebrations were again held at LuAZ — here the first VAZ-2110 car rolled off the assembly line. 30 thousand per year — such are the planned production capacities for the output of the Lutsk "ten." A general agreement has been signed between the "Bohdan" corporation and JSC "Auto-VAZ." This year it is planned to produce 4 thousand such cars, which will be distributed in Ukraine, the Czech Republic, and the countries of the Middle East.

At the presentation of the new car, the director of the Assembly Kit Center of JSC "Auto-VAZ," Mykola Dudin, noted: "Our cooperation has become a good tradition. To date, about 67 thousand VAZ cars have been assembled at LuAZ. It is gratifying to say that this is the first time the Volga Automobile Plant has moved its production of cars of the tenth family outside of Russia and organized their assembly at the Lutsk Automobile Plant."

At LuAZ, the assembly of VAZ cars from Russian components has been carried out since May 2000, and its capacities grow every year. For the Russian partners from VAZ, the Ukrainian car market continues to remain a priority — the company's share here reaches up to 40%.

The cooperation program with "Auto-VAZ" has further strengthened the already strong financial and economic position of LuAZ. Even last year, under conditions of tax pressure "at the instigation" of the former authorities, the plant's income reached 846.5 million hryvnias. In the first quarter of 2005, products worth 180 million 600 thousand hryvnias were manufactured here. This allowed the Lutsk enterprise to take a leading position in the "TOP-100" ranking of the best companies of Ukraine.

German Expansion — an Autonomous Path

Western competitors of domestic automobile manufacturers are not dozing either. German automobile companies are showing increased interest in the Volyn region. As is known, on March 29, 2005, in the Small Mariinsky Palace in Kyiv, in the presence of the Vice Prime Minister of Ukraine for European Integration Oleh Rybachuk, heads of the Office of the Delegate of German Economy in Ukraine, and representatives of leading German companies operating in Ukraine, an investment agreement was signed between the Volyn Regional State Administration and the German company "Kromberg & Schubert" on the construction in Lutsk of a plant for the production of on-board electrical networks for automobiles of the "Daimler Chrysler AG" concern.

According to the agreement, the amount of direct investment for the construction of the plant is 18 million euros, and the creation of 3,000 new jobs is planned. The total area of the plant building will reach 16 thousand square meters. The completion of final commissioning works will be carried out by December 31 of the current year, and the start of production is planned for the fourth quarter of 2005.

The Germans began construction of the plant practically immediately after the agreement was signed. On June 10, on 7 hectares of land belonging to the Boratyn village council of the Lutsk district, construction work on the plant began. The general director of the German concern "Kromberg & Schubert," Otfried Vollerd, came for the start of the work. He noted that the site for the plant was chosen advantageously — a bypass road is nearby, a railway line has been brought here, and there is a developed infrastructure and communications. Otfried Vollerd confirmed that training for future plant employees will be conducted at the concern's expense.

The German competitor of "Kromberg & Schubert" — the company "Volkswagen" — has also intensified its expansion into Volyn territory. A year ago, an agreement was reached between the Lutsk "Enko" plant and the "Volkswagen" company on the creation in Lutsk of a joint venture that will produce electrical equipment for this brand.

It is worth recalling that an investment project involving German partners has also been registered in the mining town of Novovolynsk. There are agreements on the construction of another plant here — for the production of transformers for the needs of the German economy.

The economic crisis in Germany is prompting German car manufacturers to increasingly turn their gaze toward Ukraine. Here there are all conditions for the production of their own goods, where the cost would be lower. In particular, German representatives are appearing in Volyn. This is facilitated by the representative of the Office of the Delegate of German Economy in Ukraine, Karin Rau. It was she who officially invited the head of the Volyn Regional State Administration, Volodymyr Bondar, to visit the German city of Dresden to hold a presentation of the Volyn region to German investors, which took place recently.

It is not excluded that after the commercial success with the creation of the on-board electrical networks plant, German investors will seriously consider whether to create another plant in Lutsk — for the assembly of finished automobiles and their subsequent sale to the Ukrainian consumer.

International Quality Standard

July 14 will become a memorable event for LuAZ not only in connection with the production of the first VAZ "ten." On the same day, the enterprise also officially received confirmation of its receipt of an international quality standard for its products. Based on the results of the certification conducted at the enterprise, JSC "Lutsk Automobile Plant" received the international certificate of the quality management system ISO 9001: 2000. On July 14, it was presented by the representative of the Bureau, Ashot Arutiunian.

The Lutsk Automobile Plant submitted its application for certification back in the year before last. The certification at JSC "LuAZ" was conducted by specialists of the international corporation "Bureau Veritas" ("Bureau Veritas"), which is a generally recognized leader in the global certification market. In October 2004, a group of specialists from "Bureau Veritas Ukraine" conducted a diagnostic audit of the existing quality management system of JSC "LuAZ" for compliance with the requirements of the international quality standard ISO 9001: 2000. The experts conducted the inspection in 24 structural subdivisions and services.

In the process of conducting audits at the enterprise, a plan for improving the Quality System was drawn up, and a number of regulatory documents were approved, in particular the "Quality Policy for 2005" and "Quality Objectives for 2005." According to the concluded agreements, experts of the "Bureau Veritas" company will annually conduct audits at JSC "LuAZ" for compliance with international quality standards.

Transformation into an Industrial Giant

The plans of JSC "LuAZ" for the near future are truly grandiose. The plant intends to expand not only production volumes and the product range. Over the course of several years, a separate industrial zone will be created between Rivnenska and Dubenska streets in the regional center — with all the necessary infrastructure. In addition to new production premises, residential buildings will also be constructed here, in particular for the accommodation and recreation of the plant's workers. The re-profiling of specialist training in Volyn higher education institutions (primarily at the Lutsk State Technical University) for the needs of the Lutsk Automobile Plant is also envisaged.

"We are convinced that no one can stop our growing progress anymore," says the head of the Supervisory Board of JSC "LuAZ," member of the Supervisory Board of the "Bohdan" corporation, Volodymyr Hunchyk. "We are confident that already this year at the Lutsk Automobile Plant it is entirely realistic to expect the production of the 100-thousandth car..." he adds.

Volodymyr Hunchyk also forecasts that by the end of 2007 the production capacities of LuAZ will amount to 3.5-4 billion hryvnias. This will give us the opportunity to confirm our presence on the automobile market of Ukraine, and most importantly — in a very short period of time to create the most modern production capacities that will meet the needs of both the domestic and foreign markets.

The plant's immediate plans include expanding the product model range. Currently, the enterprise's model range has been supplemented by cars of the "Hyundai BG-1043" and "ISUZU" brands.

Lutsk Mayor Anton Kryvytskyi forecasts that with the implementation of such plans, not only a new economic era in the history of Lutsk begins at the Lutsk Automobile Plant, but also of all Volyn. If this project is implemented, the region has every chance of transforming from an agrarian-industrial into an industrial-agrarian one.

"As an economist, I realistically see that the Lutsk Automobile Plant can become the center of the region's industrial progress," asserts Anton Kryvytskyi. "After all, in Lutsk there is a powerful bearing plant with Swedish investments, an instrument-making plant, an electrical apparatus plant, a plastics plant, and a municipal machinery plant, which are capable of producing individual elements for the "Bohdan" trolleybus or bus. In addition, the region has specialized plants in other cities — in Kovel ("Kovelsilmash"), in Novovolynsk (the STO plant), capable of manufacturing component products for LuAZ's output. We have preserved them all; now these enterprises are working stably and increasing production rates. We have sufficient grounds to hope for a quick return."

"I see nothing bad in the fact that our region, in addition to being agrarian, will also have a certain industrial potential," the head of the Volyn Regional State Administration, Volodymyr Bondar, actually agrees with this thesis. "We truly have all the prerequisites for this."

Vitalii Buriak, Western Information Corporation