The Torrington Company (Torrington, Connecticut, a division of Ingersoll-Rand) opened a new plant in Olomouc, near Brno, in the Czech Republic.

Built at a cost of USD $20 million, Olomouc will employ 400 people. The factory produces price-sensitive automotive-size bearings, primarily for the European automotive industry.

Olomouc's product lines are being transplanted from Torrington's factory in Kunsebeck, Germany, about 425 miles away. Kunsebeck's 200 employees who produced these bearings were laid off and the machinery -- at least 275 pieces of it -- moved to Olomouc.

Kunsebeck and its remaining 800 workers will continue to manufacture high-precision, short-run, non-commodity bearings. It will also produce a number of precision components for the bearings made in Olomouc.

John Turpin, I-R's VP responsible for Torrington's business unit, put the two operations at odds, saying, "The German workers know they are competing with their colleagues in the Czech Republic for a future share of Torrington's production work." Rod Glanville, Torrington's HR Director, was less abrupt, saying, "It's not our intention to expand the Czech factory at the expense of further declines in the labor force in Germany."

Sources told eBearing there is no real competition, and that some future production decisions have already been made in favor of the Czech operations. While shifting the German production may be only the first step, production in other higher-cost plants is also under review for shifting to Olomouc.

Nevertheless, the forces at work are economic. Torrington's German workers earn the equivalent of over $15 per hour, while those in the Czech Republic are earning less than $3 an hour. Some of the differential is made up by a productivity drop (initially, Olomouc workers are predicted to be less than half as productive as the German workers), higher scrap rates (optimistically expected to be 4%, vs. 2% in Germany), and the need to outsource most of Olomouc's precision components.

To help the transition along, at least 25 production engineers from Kunsebeck will spend the next few months bringing Olomouc up to speed. Similarly, a large number of key Olomouc production workers are being cross-trained in Kunsebeck.

Milan Tomas, head of Torrington Czech Republic, told the Czech News Agency, "The Olomouc investment should return in three years, and then we will be able to expand further."

He indicated Olomouc will export 95% of its production, initially estimated at $30 million and growing 10% each year. He said, "If the production capabilities turn out to be insufficient, we will tackle the situation either through an acquisition of another producer or through the construction of a new plant."