Government approves investment deal with GE Aviation

Photo: archive of GE Aviation

The Czech cabinet has approved an investment deal with GE Aviation to build a CZK 9.5 billion factory to produce aeroplane engines in the Czech Republic. More than 500 jobs should be created at the plant near Prague, which is expected to begin production in 2022.

Jan Mládek, photo: archive of Ministry of Industry and Trade
The Czech minister of industry and trade, Jan Mládek, made an unusually exuberant announcement on Twitter on Wednesday: “Support for the GE investment went through at 17:27! Glory be. We finally managed it. I thank my colleagues at the Ministry of Industry, CzechInvest and the Ministry of Finance.”

Minister Mládek told journalists that Wednesday’s cabinet meeting had been “relatively dramatic” but in the end an agreement acceptable to the Ministry of Finance had been reached.

GE Aviation – the aircraft engine wing of American multinational conglomerate General Electric – had announced plans to build a turboprop development, test and engine production in the Czech Republic at the start of the year.

However, it has taken until now reach agreement on the details with the Czech government.

Indeed, the Czech government repeatedly broke off talks with GE Aviation before the latter made a firmer pledge to actually going through with the investment, the Czech News Agency reported.

“This contract contains a stronger commitment than was previously the case,” the Czech minister of finance, Andrej Babiš, said.

GE Aviation can apply to the Czech state for standard investment incentives for the construction of the new plant, amounting to a maximum of 25 percent of eligible costs.

The plan is to begin with production of 400 engines a year in 2022 before boosting output to 600 annually four years later.

Photo: archive of GE Aviation
Minister Mládek said the investment would be implemented in two stages, with the first involving cooperation on development between GE Aviation and the Czech Technical University in Prague, which will supply hundreds of aviation engineers.

Research funding will go to the Czech Technical University not GE, said Mr. Mládek. The state will make a loan to the university between 2016 and 2018 that should be returned once the institution gets a grant from the European Union. It has already applied for that support.

The second phase will see the US firm actually go into production. Minister Babiš had said prior to Wednesday’s breakthrough that GE had not made it sufficiently clear it would follow through with the plant once the research stage had come to an end.

GE’s CEO for Central and Eastern Europe, Peter Stračár, said the deal offered a great opportunity for Czech industry to shift toward advanced technologies.

The engines produced at the planned factory will be among the most advanced in the world, Mr. Stračár said.

The company had also been looking into a possible investment in Poland, in case an agreement with the Prague government could not be reached, reported.

The deal will make the Czech Republic one of only five countries around the globe where aircraft engines are designed and manufactured.