In this week's Business News: Škoda cuts production as the economic slowdown bites; local police offer jobs to laid off Škoda employees; despite woes, confidence in Czech businesses remains high; the state budget is burdened by pension costs and industrial production decreased by 7.6 percent in October.
Škoda cuts production as slowdown bites
Czech car maker Škoda Auto is to cut production to four days a week from January to June 2009. The cuts are designed to help prevent staff lay-offs as the economic slowdown affects the Czech automotive industry, heavily reliant on exports. Previously, the company had estimated an output of at least 700,000 cars in 2008, but now only expects to sell only 690,000 cars. According to a deal reached between management and workers, production will no longer occur on Fridays, except for production of the “Roomster” model which will cease on Mondays. Škoda staff will be asked to stay home during the shutdowns and only receive 75 percent of their average wages. Additionally, Škoda will suspend production on December 19 of this year over the Christmas period and will not resume production till January 19. The company has already interrupted production several times this year due to falling demand.
Police offer jobs to laid off Škoda employees
Illustrative photo: Kristýna Maková
In related news, it has emerged that the Czech police service is offering jobs to laid off workers at the Mladá Boleslav plant, north-east of Prague. The plant has already been forced to sack around 1500 employees, but the situation is being partly mitigated by promises by the police and city authorities to employ several hundred of these workers – at present, the police services say they are short of as many as six hundred staff in the region. However, concerns are also growing as many of those made redundant are Polish, Ukrainian and Vietnamese immigrants, and city authorities have noted an increase in homelessness in the area. Around 2500 more employees of the Škoda plant are set to be made redundant in the coming week’s and months.
Confidence in Czech businesses remains high
Foto: Kristýna Maková
A new report from the association of European trade and industrial chambers shows that in most instances, Czech confidence in their country’s business environment remains above the European average. The Czech Republic ranked eighth in the poll out of 26 countries surveyed and revealed generally optimistic views from Czech entrepreneurs about the business sector, economy and banking sectors, despite a minor fall in confidence from previous year’s figures attributed to the global economic slowdown. This is reflected by the fact that the average confidence of European entrepreneurs is at its lowest levels in sixteen year’s since polling began. The only area where confidence is low, according to the poll is among Czech exporters, who have been hit by the economic slowdown the hardest – estimates suggest almost two-third of Czech businesses are geared towards export.
Budget burdened by pension costs
Miroslav Kalousek, photo: CTK
The 2009 state budget passed on Thursday by the lower house of Parliament will be heavily burdened by pension payouts, according to new data. The figures reveal that while healthcare consumes only 49 crowns out of every 1000 spent by the state, pensions consume 292 crowns per 1000 – almost a third of the entire state budget of more than one trillion crowns. The budget anticipates a deficit of around 38 billion crowns, though the Finance Minister Miroslav Kalousek recently conceded that this figure will likely go up as the economic slowdown continues to bite. Other expenditures presented in the budget are 67.3 billion to be spent on transport, 37 billion to be spent on infrastructure, 39.7 billion on agriculture and 46.3 billion to be spent on defence.
Czech industrial production down in October
Czech industrial production decreased by 7.6 percent in October according to new data from the Czech Statistics Office. Transport-related products, mostly automobiles, which fell by 14.7 percent, contributed most to the poor showing, according to the figures. Indeed, the results are the worst since 2002. Other manufacturing businesses also suffered falls in production, including textiles, basic metals and fabricated metal products and manufacture of food products and beverages. Manufacturing revenues fell by 7.9 percent year-on-year, while seasonally adjusted sales were down by seven percent.
