Hungary labor shortage a headache for German carmakers

BUDAPEST, Oct 19 (Reuters) - German carmakers Audi and Daimler feel the pinch from a labor shortage in Hungary, executives said on Wednesday, adding efforts to improve worker mobility and local infrastructure were needed.

Years of emigration to western Europe have created labor shortages in countries on the European Union's eastern flank like Hungary, Poland and the Czech Republic, which make it tough for businesses of all kinds to recruit.

The car sector employs over 100,000 people and accounts for over a tenth of Hungarian exports. MAGE, a local trade group, said factories in Hungary, dominated by big western brands, produced over half a million cars last year.

Audi has invested 8.5 billion euros in its Hungarian plant in the western town of Gyor, while Daimler announced in July a one billion euro expansion of its Mercedes factory in Kecskemet, where it expects to start production in 2020.

"There are some reasons for concern," Audi Hungaria Managing Director Peter Koessler told an automotive conference. "If we think of human capital, we see problems in the necessary quantity as well as finding sufficiently skilled colleagues."

Audi, which produced over 2 million engines and more than 160,000 cars in Hungary last year, sponsors local university faculties to ensure its hiring needs are met.

Koessler said Hungarian authorities should focus efforts on improving housing conditions and local infrastructure to boost worker mobility and ensure a sufficient future labor supply.

"These are big challenges. If we manage to solve them, there are nice prospects for the future development of the Hungarian car industry. But there is work to be done," he said.

Mercedes-Benz Manufacturing Hungary Chief Executive Christian Wolff said Daimler's decision to expand in Hungary, which will create 2,500 jobs, was a reflection of a good local investment environment, but he also flagged difficulties.

"The labor situation will definitely pose a challenge for the future," Wolff said. "We need to work hand in hand with the government and local authorities."

He said competitive wages were just a start. Daimler also had to invest in local education and provide facilities such as a kindergarten and housing for workers in Kecskemet.

However, Wolff added that Hungarian companies should avoid being sucked into a wage hike spiral in an effort to catch up to western pay levels quickly, as that would damage Hungary's competitiveness.

Data published earlier on Wednesday showed Hungarian gross wages rising by 6.9 percent August at a time of no inflation. (Reporting by Gergely Szakacs; Editing by Tom Heneghan)

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