Skoda reportedly confirms VW talks over Czech production shift to Germany

Skoda reportedly confirms VW talks over Czech production shift to Germany
The VW plant in the seaport town of Emden, northwest Germany, where unions at Skoda fear some Czech automaking production could be transferred.
By bne IntelliNews October 8, 2017

Skoda Auto has confirmed to workers that the option of transferring some automaking from Czechia to a German plant of parent company Volkswagen is a real consideration, Czech financial daily Hospodarske noviny reported on October 6.

Chair at Skoda, Bernhard Maier, reportedly informed workers in a letter that the move was being looked at solely because there is a lack of available workers in Czechia, meaning there is a question mark over whether demand can be met. Czech production sites would, however, always remain of paramount importance, with the principle being that production would only be switched to Germany to cope with demand peaks, he assured employees. No present, detailed plans for production transfers were in existence, Maier’s letter added.

Also on October 6, Czech daily Pravo said that there were indications that Skoda’s Kvasiny plant would not in future have room for the production of the Superb car model because it would be used exclusively for making SUVs.

The Skoda unions have warned that their members will work less overtime if Skoda and VW go ahead with moving some production to Germany, while Czech-Moravian Confederation of Trade Unions (CMKOS) leader Josef Stredula told media that the fact that there were actually discussions about pushing ahead with such a plan pointed to a fundamental change of strategy. Management had never before referred to any considerations of taking away one of Skoda’s models, he said.

Czech Prime Minister Bohuslav Sobotka on October 4 said he was seeking to meet management and unions at Skoda - seen as one of the most historic and impressive aspects of the country’s engineering prowess - after reports of the possible production move surfaced. There are also fears that Volkswagen, strategically unsettled by the unexpected ‘competition’ posed by its highly successful and lower-cost stablemate, may make Skoda pay higher fees for shared technology.

Unions believe the partial production shift would cost up to 2,000 jobs. The plan would apparently involve moving the manufacturing of the Superb from Kvasiny to Emden in northwest Germany.

When bought by Volkswagen around two decades ago, Skoda - seen as part of the nation's 'family silver' by Czechs - was solely seen as an entry brand for its giant owner. However, 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.

Skoda Kovo union chief Jaroslav Povsik has said that the fact that the VW Passat is not doing well, while the Superb is selling impressively, represents part of the background behind the possible production transfer.

For foreign investors, the advantage of cheap labour in Czechia has been significantly reduced in years of late given the country’s ultra-low unemployment and the consequent demands for higher wages which that has driven.

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.