VW to Curb Skoda’s Growth?

It has been rumoured this week that Volkswagen are looking at measures that will curtail Skoda’s growth amid fears that the Czech manufacturer is on-track to overtake Volkswagen within the Volkswagen Group.

As VW continues to overcome the shock-waves felt by the recent DieselGate scandal, Skoda have continued to grow and operate at an increased profit. Last year Skoda reached a profit margin of 8.7%, second only to Porsche within the Group, and only last month celebrated the production of their 20,000,000th car. Meanwhile, VW is facing redundancies as management aim to cut excess volume.

Výroba Škody Citigo v závodě WV Bratislava.

Skoda’s success has become the source of tension within VW in recent times

 

As a result, voices from within VW are complaining about what they consider to be Skoda’s advantageous position; namely cheaper labour in Czech factories and access to VW’s wealth of technical knowledge. Average wages in the Czech factories are €10.10 per hour, compared to €38.70 per hour in Germany.

Representatives of VW workers have suggested that Skoda should move production of some models to the underused German plants and pay higher royalties for the use of VW technology. The effect of this would be wide-felt within the marque as the MQB architecture now underpins the vast majority of models in one way or another.

Upon hearing the news, Czech Prime Minster, Bohuslav Sobotka, is said to have requested a meeting with the VW board. A spokesperson from his office stated that they would strive to ensure that “production is not moved outside of the country.”

M1, výroba

Czech workers are said to earn less than the German equivalents

The story was initially broken by Reuters only this week. In response, a VW Group spokesperson said only that “the future positioning of brands is being looked at, but discussions are still ongoing.” Tensions are expected to rise ahead of a November supervisory board session due to approve annual investment budgets across Group.

Skoda’s main Union Chief, Jaroslav Povski,  has objected to statements that Skoda had an unfair advantage. “Such news is in essence aimed against Skoda Auto, its employees who are admonished for their success, flexibility, production quality and their business results. Behind this, though, is an enormous deployment of all employees (and) work on weekends at the expense of family life.” he said.

He closed with the stark warning that “if this situation will continue and not come to a quick correction, unions will no longer support flexible work and other necessities for growth of the company.”

The outcome of the tussle is still far from clear. But the odds are stacked against Skoda. German unions hold over half of the 20 board seats at Volkswagen with another 2 seats occupied by the German state of Lower Saxony – home to a large number of VW employees.

Skoda's factories - under threat?

Skoda’s factories – under threat?

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