POTENTIAL FOR SCANIA PLANT REOPENING IN IRAQ

UNCLAS STOCKHOLM 000720


E.O. 12958: N/A
TAGS: ECON ETRD SW IQ
SUBJECT: POTENTIAL FOR SCANIA PLANT REOPENING IN IRAQ

REF: NONE

Summary
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1. Deputy Chief of Mission Robert Silverman and FCS Hakan Vidal
visited Scania to establish the status of Scania's interest in
setting up an assembly plant in Iraq. Since 1961, Scania has
delivered over 31,000 commercial vehicles. Scania have two pending
tenders from Iraqi Ministries and are prepared to set up their
facilities again.


2. U.S. Embassy in Stockholm will be organizing a videoconference
with appropriate U.S. Embassy officials in Bagdad to brief Scania
representatives about Iraq and answer any questions that they may
have in connection with setting up an assembly plant. The Minister
for Trade, who will lead a trade delegation to Iraq on November 17,
will also be invited to attend.

Background
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3. Scania has a long history in Iraq. In the 80s Iraq was one of
Scanias biggest markets. Scania sold about 3,000-4,000 vehicles per
year (mainly trucks). Scania is a very strong brand in Iraq. Since
1961, they have sold about 31,000 vehicles to Iraq. The most recent
assembly operation was in 2005 concerning buses.


4. Scania has a manufacturing plant in Brazil and it is from this
plant parts have been delivered to Iraq for assembly. Scania is
unique in the way that they have full interchangeability between the
production plants in Sweden, France, Brazil and the Netherlands.
The parts will probably be taken from Europe if they start assembly
again in Iraq.


5. In May 2008, Scania signed a Memorandum of Understanding with the
Ministry of Industry & Minerals in Iraq. The Memorandum involves a
pre-study for possible chassis assembly of Scania trucks and buses
in Iskandariyah, the Iraqi State owned Auto Industry Factory.
Initially, however, the vehicles will come in as CBUs (Completely
Built-up Units). The time frame from go ahead to start of assembly
is 6 months. The production is planned for 500 units per year.
Scania will also set up a workshop/dealership in the Kurdish part of
Iraq.


6. Scania has two pending tenders with Iraq. One is for 1,600
vehicles (fuel tanks, water tanks and buses) to be sold to the
Ministry of Defense. The other is for 500 vehicles for the Ministry
of Oil.


7. The total market for heavy trucks (class 6) is expected to be
15,000 units per year in 2017. Scania would like to capture 15
percent of this. Today they market is less than 1,000 units.
Scania's distributor is Al-Bunnai.

WOOD