At the “edge of capacity,” but its stance is unwavering.
In response to earlier reports, Czech carmaker Skoda has cemented its commitment to its operations in the republic, addressing concerns that production for the brand could be moved abroad at the behest of parent company Volkswagen Group.
Concerns on the matter were raised after it came to light that sister company Volkswagen was facing an overcapacity issue in Germany, which could result in the company having to lay off staff. While Volkswagen has faced lacklustre sales figures thanks to the Dieselgate emissions scandal, Skoda has been able to thrive, stealing customers from the beleaguered German brand and winning over new customers with its ‘Simply Clever’ innovations.
According to members of Volkswagen management board, they feel that Skoda enjoys an unfair advantage, having access to the German conglomerate’s technology and engineering know-how while being able to assemble comparable cars to Volkswagen’s portfolio for less, thanks to the lower labour costs in the Czech republic. As a result, Skoda’s strong value proposition has been cannibalising sales from the more ‘premium’ VW, leading to the overcapacity issues that the latter marque faces (in part, at least).
The issue stems from a debate between profits and jobs, as well as control from central management and autonomy that Volkswagen Group’s 12-marques enjoy. While Skoda has flourished under the near 3-decades it’s spent under the VW Group, Volkswagen itself is struggling, feeling the weight of excess capacity and under-utilised assets. Thousands of job cuts are being considered by the once-infallible German carmaker, and the workers’ unions that command clout within the company see Skoda as the potential saviour, as well as a threat.
The workers unions reckon that to save jobs in Germany, Skoda ought to move some of its production out of the Czech republic and make better use of Volkswagen’s under-utilised production facilities. Further, it’s suggested that Skoda ought to pay far heftier royalties to Volkswagen for their use of shared technology, like the Group’s next-generation ‘MQB’ and ‘MEB’ vehicle architecture. While this would undoubtedly keep VW bobbing along through stormy waters, it would then only really shift the issue to the Czech Republic, where Skoda’s workers union says such a move would put some 2,000 jobs at risk. When contacted by Reuters, VW’s works council declined to comment.
However, Skoda CEO Bernhard Maier told reporters that the Czech Republic would still be home to the brand, as its base of operations as well as production, according to an AutoNews report.
“Skoda is running at the edge of its capacity, which is evidence that our strategy is working. At the moment, concerning global demand, we are not able to cover it from the Czech Republic, and for this reason we are looking around at other production capacities. But as a matter of principle, our Czech factories are and will always remain first choice.” — Bernhard Maier, CEO, Skoda
In recent months, Skoda has taken on some 3,000 additional production staff to help the company meet demand, adding to the 28,000 staff that Skoda already employed by the end of 2016. The Simply Clever marque, with its success across the globe, can now lay claim to being the second most profitable marque under the Volkswagen Group umbrella, surpassed only by luxury carmaker Porsche.
Interestingly, Volkswagen boss Dr. Herbert Diess thinks that “some internal competition is helpful,” making light of the concerns by reminding onlookers that VW AG has some 100 cars across its portfolio, so some competition from Skoda isn’t all that surprising. While that may have been fine for a while, with an electrified future on the horizon, tensions can only continue to rise, likely hitting a crescendo on November 17th when the VW Group supervisory board meet to approve annual investment budgets for the conglomerate.
Stay tuned to CarShowroom as we bring you more updates as they come.
