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Workers assemble cars in Kia Motors Corp.’s factory in Zilina, 200 kilometres north of Bratislava, Slovakia, on Oct. 3, 2012.PETR JOSEK/Reuters

With Europe's car market tumbling, it would surprise few that Volkswagen AG's sprawling factory on the outskirts of the Slovak capital won't be raising production.

But it's not for want of trying; it is working at full tilt already and on course to double production to 400,000 vehicles this year.

"The year 2012 is the most successful year ever for Volkswagen Slovakia," said unit chief executive Albrecht Reimold. "We can be 100 per cent sure that we will reach our target."

That's not a refrain you will hear much in Western Europe, much of it in recession, where the industry is girding for plant closures and job losses after double-digit percentage falls in European demand.

VW's success in Slovakia illustrates a divide among the continent's car makers.

Those that cut costs last decade in Western Europe like Volkswagen, or those who were never saddled with expensive factories there, such as Korea's Hyundai Motor Co. and Kia Motors Corp., are now investing in new designs, conquering new markets and ramping up production.

Those who are only considering restructuring now, however – PSA Peugeot Citroën, Fiat SpA, Renault SA, and Adam Opel GmbH – are being pushed to the edge, as deep problems at their operations in Western Europe outweigh the benefits of their investment in cheaper eastern facilities.

Between them, VW Group, Mercedes-Benz, Kia and Hyundai have raised their share of the European market to 35.5 per cent in the eight months to end August 2012, from 30 per cent in the same period of 2010.

In a dismal symmetry, the combined share of Renault Group, PSA Peugeot, Fiat Group, and Opel has fallen to 33.3 per cent, from 38.6 per cent.

After the Soviet Union collapsed in 1989, foreign car firms and other manufacturers poured tens of billions of euros into the former Soviet satellite states, transforming a soot-stained region once known for shoddy technology into a landscape dotted with some of the world's most advanced factories.

One of the biggest beneficiaries was the former Czechoslovakia, an industry-heavy country that split peacefully in 1993 into Slovakia and the Czech Republic. They are now the world's top two producers of cars per capita.

Factories in Poland, Hungary, Romania and Slovenia are also big players in the region, which produced 3.24 million passenger cars in 2011, more than a fifth of the EU total.

Including the hundreds of assembly plants supplying parts such as windshields and tires, the sector employs more than 360,000 people across the region.

Volkswagen, in the midst of a €1.6-billion ($2.1-billion U.S.) investment into its Slovak operations through 2016, is just one example.

Up the road in the foothills of Slovakia's Fatra mountains, the most modern factory owned by Korean car maker Kia Motors looks set to beat its production goal of 285,000 SUVs, compact and family cars.

"We can exceed it," said Eek-Hee Lee, CEO of the plant. "Maybe 290,000." Across the border in the Czech Republic, sister company Hyundai is also on track to raise production to its full 300,000-vehicle capacity.

To the south in Hungary, Germany's Daimler began producing new Mercedes B-class cars at an €800-million factory this March, boosting Hungarian car production 11 per cent in the first eight months of the year.

It is considering launching production of a new coupe next year and doubling output to 300,000 cars by 2015, media have reported, a badly needed development for an economy that has slipped in and out of contraction since 2008.

The biggest Czech exporter, VW's Skoda, expects to improve on its record 875,000-car output in 2007 and plans to raise that to one million by 2014 and 1.5 million by 2018.

"What we have shown in Western Europe is that you can sell cars even in cyclical downturns, provided you have the right product," Skoda CEO Werner Eichhorn said last month. "Clever, good cars at an attractive price is what we make, and these qualities are especially paying off now."

Dacia is a relative bright spot for ailing parent Renault, which has plowed €2-billion into its plant in Mioveni, Romania, since 1999. Dacia's sales have stood up reasonably well – they slipped 2.7 per cent in the first nine months of 2012, while the market shrank 7.2 per cent – but that pales by comparison with Renault's thundering 21-per-cent fall in the same period.

Kia's European sales jumped 20.5 per cent, while Hyundai's were up 9.6 per cent.

Volkswagen group sales slipped just 0.7 per cent over the same period, with its Audi brand growing 5.4 per cent and Skoda 0.5 per cent. Daimler's Mercedes Benz slipped just 1.1 per cent.

The irony for the struggling makers is that their wider problems are also forcing them to make cuts in their low-cost operations in Eastern Europe.

Peugeot, which endured a 13.7-per-cent fall in nine-month European sales, has announced plans to cut about 12,000 jobs in Europe and shut at least one factory in France. It will make production cuts at its French sites but also in Eastern Europe.

In Slovakia, it will shut for 21 days later this year, and in the Czech Republic it will shed 345 jobs at a plant it shares with Toyota and cut output by a fifth to 215,000 cars.

Similarly, Suzuki Motor Corp., which also produces cars for Fiat and Opel at its plant in Esztergom, Hungary, said it would cut one of its two shifts for the last two months of the year, producing only about 155,000 of its SX4, Splash, new Swift, Fiat Sedici and Opel Agila models.

Things are particularly bad in Poland, where car production is dominated by Fiat and General Motors' unit Opel, which suffered drops of 16.8 and 15.2 per cent in sales, respectively, in the first nine months of 2012.

The latest data from Fiat's plant in Poland showed output fell by a quarter to 277,617. Opel output fell 28 per cent there.

"It is clear that the crisis in the European automotive market is making its mark on Polish production plants," Polish auto industry association Samar said.

While Volkswagen cut 16,500 jobs in Europe in the past decade, shut five plants and cut production by a fifth, it now runs its plants at close to full capacity and has cash to invest and expand. Unburdened by expensive labour contracts in the West, the Korean firms are also running at full capacity.

But Peugeot, Renault, Fiat and Opel are operating below the 75-per-cent capacity level industry experts say they need to make a profit.

Volkswagen, Hyundai, Kia and some other plants have also capitalized on robust local supply chains that provide up to 70 per cent of the parts that make the cars.

For example, Kia has an accompanying plant to produce engines for both itself and Hyundai, which returns the favour with transmissions. Volkswagen gets engines from a plant nearby in Gyor Hungary, which also makes Audis.

"Renault has eight plants in Europe. Fiat has six or seven. Hyundai and Kia have just one (each). That's the difference," said Petr Vanek, spokesman for Hyundai in the Czech Republic.

The advantage is clear. In the first half of 2012 Hyundai and Kia earned an average of €1,386 per vehicle before interest and tax. Skoda cleared €1,100, and VW managed €916, a survey by the CAR Centre of Automotive Research at the University of Duisburg-Essen showed.

Peugeot lost an average €789, while Fiat lost €142.

Average Czech wages – including salaries and employers' social contributions – are just a third of Germany's at €10 an hour. Romania is even cheaper, where an average worker costs €4, compared with France's 34.

According to IHS Automotive analyst Carlos da Silva, three strategies are at work.

The first is to build high-end cars for less, as in Volkswagen's Slovak plant, where it is the sole producer of the Touareg, the Audi Q7, and much of the Porsche Cayenne – cars that have resisted crisis.

The second is a European push into small family cars, less profitable models aimed at cost-conscious consumers that require large volumes and low overhead to squeeze out a profit.

That's bad news for Europe's strugglers.

Peugeot's 308, Renault's Clio and Megane, Fiat's Bravo and Opel's Astra are assembled in factories across the world, with production still going strong in more expensive Germany, Italy, and France.

In contrast, Kia's Cee'd and the Hyundai i30 are made exclusively in emerging Europe. Volkswagen produces its "UP!" model solely in Bratislava.

"You have to make a lot of them," Mr. da Silva said. "If they can compensate with a lower cost base, it makes a lot more sense for them to make them in Hungary, say, than in Stuttgart."

The final approach is to counter the European downturn by targeting new markets as Skoda is doing in Russia, China and India. Dacia and the Korean car makers say their low-cost SUVs are perfect products for the world's least developed – and fastest growing – regions.

"The crisis is both a challenge and an opportunity, because if you look at the size of the market, which is shrinking every year, Europe begins to look small and slow," said Hyundai's Mr. Vanek. "And so we are looking over the hill. We may have future potential markets elsewhere, on other continents, like Africa."