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Turkey: transit van project supports small businesses

Workers in vehicle factory

Melda Arpaciglu takes a lot of pride in her new home with its spacious, well-equipped kitchen, smart dining area and cosy lounge. Every surface shines in the recently-built house in Izmit, an industrial town some 100 kilometres south-east of Istanbul.

Melda, 30, and her husband Deniz have worked very hard to be able to afford their new property. Deniz is a university lecturer in seismology while his wife manages a team of purchasing agents at Dostel Makina, a medium-sized company that supplies molded sheet metal and other parts to car makers.

“I like my job because it’s dynamic and has given me a lot of self-confidence,” says Melda. “Financially, it has allowed us to buy the kind of house we have always wanted to own.”

The EBRD is trying to help people like Melda who work at small and medium enterprises (SMEs) in Turkey. It is doing so by lending €150 million to automobile maker Ford Otosan for the production of a new line of Ford Transit van – a project that is expected to create lots of work for SMEs like Dostel Makina that supply parts to the car factory.

Ford Otosan is a joint venture between the Ford Motor Company and Turkish industrial giant Koc Group. Its plant near Izmit in Kocaeli province is the main producer of Ford Transit vans for Europe with an output of some 300,000 vehicles a year. Indirectly, the factory provides jobs for the tens of thousands of people employed by Ford Otosan’s many suppliers.

“Our suppliers are an extension of our business,” says Taylan Avci, Ford Otosan’s Assistant General Manager. “We have a very strong supplier base in Turkey. We act as one family: our goals and targets are the same.”

The Future Transit project will see Ford Otosan produce a new generation of the hugely popular Ford Transit van in 2012 for the domestic and export markets. The project’s total investment cost is US$630 million, much of which will be spent on new production equipment for Ford Otosan and its suppliers.

The EBRD is directly lending Ford Otosan €60 million while the remaining €90 million of the EBRD loan was syndicated to Finansbank, Societe Generale, HSBC and the State Bank of India.

As well as providing indirect support to suppliers through its loan to Ford Otosan, the EBRD is considering providing direct loans to some of these companies to cover the additional machinery and labour costs needed to meet the requirements arising from the Future Transit project.

“The technological advances in the new line of Transit van will require greatly improved sub-components,” says Hande Islak, a Principal Banker in the EBRD’s Manufacturing and Services team. “That means suppliers will have to become a lot more sophisticated. As a result they will be much more attractive to other car makers, both in Turkey and abroad, and that will boost the Turkish automobile sector in general.”

So that’s good news for companies like Dostel Makina and for the people, like Melda Arpaciglu, who are employed by them. Thanks in part to the EBRD, they can look forward to a busy and prosperous future.