Former Czech PM asks government to speak with Volkswagen about future of Škoda

Former Czech Prime Minister Petr Pithart has called on the government to express concern regarding the possible change of Czech automobile manufacturer Škoda Auto’s position within the Volkswagen group, the Czech News Agency wrote on Monday. Mr. Pithart and the former industry minister, Jan Vrba, argue that Volkswagen would be acting contrary to the appendages in the contract through which it acquired Škoda nearly 30 years ago.

Volkswagen’s gradual full acquisition of Škoda began in 1991, after the German company made a generous offer promising to pay off the Czech car maker’s debt and maintain Škoda as a fully-fledged brand within Volkswagen Group. Since then, Škoda has prospered, becoming one of the engines of the wider Czech economy with activity in over 100 markets across the world.

However, reports in German and Czech media have been suggesting that the success of the Škoda brand is seen as a threat by Volkswagen. Last year, Škoda’s trade union weekly (Škodovácký odborář) wrote that the chief strategist of Volkswagen, Michael Jost, “hates Škoda” and “is actively moving against it”. Several stories have also appeared in Czech media this year suggesting that the newly appointed head of Škoda Auto, Thomas Schäfer, has been tasked by Volkswagen to “cut Škoda’s wings“ and make it a cheaper car brand aimed at competing with Renault’s Dacia in developing markets.

Petr Pithart,  photo: archive of Radio Prague International

The Chairman of the Board of Management of Volkswagen Group Herbert Diess said this summer that Škoda was not sufficiently aggresive when competing with rival French and Korean brands, and that Škoda will have to strenghten its position in the cheaper car segment, saying that there was no sense in having the Czech manufacturer as a third premium brand within the Volkswagen Group.

However, after a meeting with the new Škoda boss  Thomas Schäfer  in August, Czech Prime Minister Andrej Babiš said that he had been reassured that Škoda will continue to manufacture premium vehicles and maintain its high level investments into research and development. In fact, Mr. Diess reportedly went as far as to say that he wants to move the Škoda brand forward, increase its output and support increased growth.

There are concerns about what this move exactly entails for the future of the Škoda brand, which has made a reputation of selling financially accessible, but relatively high-quality vehicles such as the Octavia and Superb models.

Petr Pithart, who was Prime Minister of the Czech Republic between 1990 to 1992 when the contract for Volkswagen’s acquisition of Škoda stocks was negotiated, has written a letter to the Czech government together with the former industry minister, Jan Vrba, calling on it to express concern over the possible change in Skoda’s position within the Volkswagen Group.

According to Mr. Pithart, Volkswagen, through Škoda, helped cultivate the Czech market environment and strengthen relations between Germany and the Czech Republic. However, “that is why we find the thus far unofficial statements from Volkswagen representatives about changing the position of Škoda within the group concerning”, the former Czech premier said.

The two former ministers warned that if Volkswagen were to focus on making Škoda a “cheap car manufacturer for cheap markets” it would be in violation to some of the appendages of the original agreement signed between the Czech government and Volkswagen nearly 30 years ago, as well as damaging to Škoda.