Spain is one of the toughest, most-competitive auto markets in Western Europe -- and perhaps the weakest. ``Everybody seems to have a factory here,'' complains Juan Manuel Rodr'iguez Jado, head of export operations for SEAT (SAY-at), Spain's government-owned automaker. Factories include those of General Motors, Ford, Renault, Citro"en, and Talbot-Peugeot, plus SEAT.
Assembly-plant saturation began when Francisco Franco invited foreign carmakers to Spain, which, at the time, was ``being isolated by the international community,'' Mr. Rodr'iguez says. ``When they arrived, it was bad news for SEAT.''
Even so, with high unemployment and cheap labor (around $5 an hour at the GM plant in Zaragoza), and a tax on imported cars of 36 percent, Spain remains an attractive place in which to build cars, even if its own domestic car producer feels the squeeze. The Spanish government requires that two-thirds of all cars be exported.
A year from now, if Spain and Portugal are admitted to the European Community, the 36 percent import tariff will disappear, and still more cars will flow into Spain.
Thus, in its fight for survival, SEAT, which dates back to 1953, is in the midst of a $5 billion capital-outlay program, and it has forged a production and sales pact with West Germany's Volkswagenwerk AG, replacing a longtime cooperative agreement which Italian automaker Fiat had scrapped in 1980, and has sought outside help in engineering and design.
SEAT now builds the VW Polo and Santana (4-door Quantum) and distributes Audi vehicles throughout Spain. It also will build 50,000 Fiat Pandas in 1985, before the agreement runs out at the end of the year, as well as the Ronda and Fura, both Fiat-based cars (Fiat 127 and Ritmo), which will remain the backbone of SEAT's export drive till 1986.
After the Fiat split, SEAT changed the cars and won a Fiat-brought lawsuit which claimed infringement of copyright. In a three-nation project, it has just launched the Ibiza, named for a popular Spanish resort island in the Mediterranean. Giorgetto Giugiaro's Ital Design did the styling, Karmann provided body design and safety engineering, and Porsche created a new engine.
This spring SEAT will unveil the M'alaga, a four-door version of the Ibiza, followed by the Marbella, a small car to replace a Fiat-originated car, next year.
So far the VW linkup has been good for SEAT, allowing it not only to expand its model lineup but also improve the quality of its cars.
The Spanish carmaker knows full well it has to look for new markets outside Spain. When Ford and GM decided in the 1970s to build new assembly operations in Valencia and Zaragoza, Spanish motorists were gobbling up some 900,000 cars a year, and 1 million did not seem out of reach. Today it's a little more than 500,000, and the prospects for a sharp increase are poor.
With 1,100 retail dealers, SEAT now claims about 28 percent of all auto sales in Spain, compared with 15 percent for Ford and less than 10 percent for GM. With its new linkup to VW, ``we cover every segment of the market from the bottom to the 4-wheel-drive Audi Quattro,'' says Mr. Rodr'iguez. Only Renault comes close to SEAT in its model range, and the French carmaker is not producing cars for the high end of the market.
In what Rodr'iguez describes as Step 1 of its survival plan, SEAT is switching from an Italian-oriented culture, the result of its alliance with Fiat, to a northern European culture, or ``the Volkswagen way of doing business on the assembly line, with more rationalizaton and higher quality controls.'' Step 2 is higher rationalization and robotization. Then ``we have to get everybody involved, including the supplier industry,'' he declares.
SEAT aims to boost its market share in Western Europe -- that is, outside Spain -- to 1.5 percent, up from 1 percent today. The company has a current production capacity of 400,000 units a year, which Fiat demanded some years ago at high cost to SEAT, far above the total 1984 output of about 250,000 cars.
The company is also stepping up its car shipments to countries outside Europe, including Latin America. It even has plans to sell cars in Canada and maybe even in the United States.
SEAT is already strong in Italy, France, Holland, and Israel, as well as some parts of Latin America. By April it plans to ship its first cars to Scandinavia and within the next six months to Britain. Its biggest problem now is that it is government owned and top-heavy with staff. While it continues to cut the payroll, it nevertheless has far more workers than either GM or Ford to produce the same number of cars.
Some analysts say the government may want to get rid of the firm. Optimistically, Rodr'iguez says, ``We're looking at 1986 to make an overall profit.'' Asked if the government would keep SEAT afloat if it continued to lose money, the export director sighs: ``If you don't make a profit, then you don't have a future.''
Rumors exist that VW may be after a wider role in SEAT, but observers ask why the West German company would want its problems; VW certainly doesn't need the added production capacity. VW has already obtained a very inexpensive entry into the Spanish market through its sales and car-assembly deal with SEAT. The GM stake in Spain, by contrast, cost the giant automaker some $1.5 billion.
Fiat is also said to be reassessing its decision on Spain.