Czech Prime Minister Bohuslav Sobotka on October 4 said he was seeking to meet management and unions at Skoda Auto after reports surfaced of parent company Volkswagen planning to move some production to Germany to reduce competition posed by its highly successful and lower-cost stablemate.

Reuters reported that sources at Volkswagen had said both a production move and a plan to make Skoda pay higher fees for shared technology were on the agenda. Unions subsequently told media that a partial production shift could cost up to 2,000 jobs and on October 5 Czech daily Mlada fronta DNES concluded that the switching of production of the Skoda Superb from Kvasiny in northern Czechia to Emden in northwest Germany is a near-certainty.

When bought by Volkswagen two decades ago, Skoda - seen as part of the nation's 'family silver' by Czechs - was seen as an entry brand for its giant owner, but its vehicles have progressively moved more upmarket, sometimes in the eyes of many buyers representing a far better deal on price, features and space. Some high-level VW managers are envious of the subsidiary’s success and profitability, union leaders claim.

In a statement announcing Sobotka’s intention to arrange meetings with Skoda management and unions, the prime minister’s office said: “The government has a clear interest which is that all planned investments by VW and Skoda in the Czech Republic are carried through and that production is not moved outside the country.”

Skoda Kovo union chief Jaroslav Povsik told Czech news agency CTK: “They want to fill capacity at the German plants. The VW Passat is not doing well, but they see the [Skoda] Superb is selling well and they would like to take it there.”

For foreign investors, the advantage of cheap labour in Czechia has been significanty reduced in years of late given the country’s ultra-low unemployment and the consequent demands for higher wages which that has produced. Skoda Auto regularly faces disgruntled unions pushing for more pay, while struggling with the scarcity of available workers.

In early September, Adient, a supplier of vehicle backseats, was unable to meet demand from Skoda Auto for its Skoda Ko­diaq due to unexpectedly high demand and a shortage of 20 workers. Even with a salary offer of CZK25,000-30,000/month, it could not lure enough job takers.

Skoda Auto, saw production rocket 13.5% in the first half of this year as Czech car output rose by 5.1% y/y in the period overall, pushing output to 756,468 vehicles.

With origins reaching as far back as 1895, the Mlada Boleslav-headquartered Skoda Auto is Czechia’s biggest automaker. It was acquired by Volkswagen in 2000 having been gradually privatised since the collapse of the Communist state in 1989. 

Automaking is hugely important to the export-driven Czech economy. If a VW plan to switch Skoda production lines to Germany is confirmed it could become a heated issue in the runup to the general election set to take place in mid-October.