Škoda Auto bosses seek to defuse fears over production transfer

Bosses at the Czech Republic’s biggest car maker and biggest manufacturing concern, Škoda Auto, have moved to try and calm fears that some production could be moved to Germany to ease the fact that local plants are working full out.

Škoda Karoq, photo: CTK

In a sense, Škoda Auto, is starting to be a victim of its own success. The latest figures in August show car deliveries up 6.7 percent with sales of the top of the range Superb up 17 percent. For the first half of the year sales stand at 585,000, up 2.8 percent on the first half of 2016. In short, Škoda Auto is having trouble keeping up with demand.

Meanwhile, though spare capacity is apparently one of the issues in other parts of the Volkswagen Group, to which Škoda Auto belongs, and that includes several plants in Germany. Looking ahead, Volkswagen bosses are clearly trying to work out how to juggle future production and that has fuelled worries within the powerful Czech KOVO union that local production could be switched to Germany.

Jaroslav Povšík described to Czech Radio how he evaluated the overall situation:

"Discussions started [in Volkswagen] about what would happen next after the Dieselgate crisis erupted in 2015. They did a wide ranging evaluation of products and investments and they worked out that a lot of German plants are not so overburdened and that the productivity was not so high. That resulted in an agreement about the future. And that’s a bit of a problem for us, for our Škoda Auto brand within the Volkswagen Group."

The immediate issue appears to be the possibility that some Czech production, representing around 2,000 jobs, could be switched to Germany. But KOVO’s Povšík says Volkswagen’s wider plans could have a much bigger impact than that:

Photo: Škoda Auto

"As part of the 66th planning round, it’s mooted that we might not finally get some things that were planned. That’s even worse than the idea of production being shifted. They are worried about electric vehicles. We need a follow up model for the Superb, an electric version of the Kodiak and an electric version of the Karoq. And they are mulling whether all these categories should be made in Zwickau, Germany. We need them here."

Škoda Auto board chairman Bernhard Maier wrote to car workers Wednesday assuring them that the company will remain Czech. But he added that Volkswagen had to use all the available capacity at its disposal to meet demand but that this would only affect peak production.

That doesn’t look like it will calm the union fears too much. They are also angered that the German mother company appears to be considering charging Škoda Auto for the technology transfer it benefits from.

With tension already rising over unions demand for a double digit pay rise of more than 10 percent next year, unions are warning once again that they could withdraw their agreement for work flexibility agreements that now underpin much of Škoda Auto’s booming production and sales success.