In a rare sign of foreign investor confidence in a country at odds with the European Union, Daimler (IW 1000/15) opened its first Mercedes-Benz factory in eastern Europe on March 29.

"We are making history today: less than four years after the location decision was made," the plant's managing director Frank Klein said on the occasion of the official opening.

The state-of-the-art plant in Kecskemet, 45 miles southeast of Budapest, is due to build up to 120,000 cars each year and employ at least 3,000 people at full capacity.

Hungary beat rival sites in Poland and Romania to strike a deal with Mercedes-Benz owner Daimler in 2008.

Construction on the 800-million-euro (US$$1.06-billion) factory began in 2009 and test production kicked off last year.

B-Class compacts have been rolling off the assembly line since then, but Mercedes said it plans to expand production to other models in the near future.

The plant could give a significant boost to a struggling Hungarian economy fighting to avoid recession. Mercedes-Benz's investment is one of the largest in Hungarian history, aside from an Audi car factory in Gyor, west of Budapest.

Prime Minister Viktor Orban, who attended the's opening, has courted foreign investment even as he has resisted EU pressure to reverse reforms that critics say give him a dangerous amount of power and undermine democracy.

Orban is seeking an estimated 15-20 billion-euro stand-by loan from the EU and International Monetary Fund, but Brussels insists Budapest must change some of its new laws before aid talks can begin.

Copyright Agence France-Presse, 2012

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