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Czech Republic: German Capital Plus Czech Labor Spells Success

  • Tony Wesolowsky

Skoda Auto is the undisputed crown jewel of Czech industry. In a two-part series, correspondent Tuck Wesolowsky takes a look at why the privatization of Skoda has been one of the most successful in the whole of the former East Bloc. This first part looks at how Skoda Auto had a head start in the race for success.

Mlada Boleslav, Czech Republic; 5 April 2000 (RFE/RL) -- Amidst the industrial din, car chassises creep along the assembly line at the Skoda auto plant in Mlada Boleslav, some 60 kms northeast of the Czech capital, Prague.

Like a well-oiled machine, crews of workers descend on the passing vehicles, riveting a bolt here, fitting a console there. Slowly the skeletal vehicular frames morph into full-fledged cars. The assembly line moves slowly but never stops. Time is crucial. Each work crew has exactly two minutes fifty-seven seconds to finish his/her job.

Hanging throughout the spacious plant, illuminated scoreboards keep a running tally of how many cars have been assembled and how many more are needed to meet the daily quota of 180. When this crew finishes its eight-hour shift at two in the afternoon (1400), a new team will relieve it, and the whole process will start over again.

In total, about 1,560 vehicles are churned out daily. Production continues around the clock. Only on Sundays and most Saturdays is manufacturing brought to a halt.

While the rest of the Czech economy sputters, Skoda Auto keeps humming along. Since the German-based automaker Volkswagen bought a 70 percent stake in the concern in 1991, Skoda has taken off. This one company accounted for nearly 10 percent of all Czech exports last year. The Skoda Octavia, Felicia, and the new model, Fabia, are exported to 70 countries round the globe. Only the North American market has yet to be conquered.

Recently, the company announced record profits for 1999. The company founded by Vaclav Klement and Vaclav Laurin more than a hundred years ago has not only survived the transition from communism to capitalism but is thriving.

Company spokesman Milan Smutny explains Skoda Auto was viable, like many other Czech firms, but it was Volkswagen that unlocked that potential.

"I think the Czech Republic loses a lot when we see firms that are dying. It's ten years after the revolution and people don't have patience anymore, and we see the potential of Czech firms that does exist here. We proved that that potential is in the people. People are the base. But in addition to that, you have to have know-how, you have to have top managers, you have to have capital. These three elements weren't here, they couldn't be."

Those three elements were supplied by Germany's Volkswagen. But Smutny points out the Czech company didn't come to the negotiating table empty-handed. The Czechs had a storied engineering tradition of their own. Of the East Bloc countries manufacturing cars during the communist era, only Czechoslovakia engineered and manufactured its cars from scratch. (Cars made in Poland and Russia were based on models brought in by Italian automaker Fiat. In Romania, it was French automaker Renault providing the blueprints for the Dacia.)

Smutny says what hurt the auto manufacturer under communism was the inability to upgrade the product. As a result, he says, Skoda got left behind technologically.

"It always made money. The problem was it never got any of that back for development, so it could improve the car's quality. Engineers knew what they had to do to improve the quality but Skoda, which was 70 percent sold at home, sold, not distributed, because you had to wait a year to get the car, the aim wasn't to give people mobility, [Skoda] was used as part of the confrontation between capitalism and socialism."

Now, Volkswagen has big plans for Skoda. It sees the Czech-based automaker serving as a springboard to penetrate other Eastern markets, especially in Russia. Skoda Felicias are already produced in Poland and Bosnia, and plans are afoot to start operations in Russia. Skoda's continuing success has the government rethinking whether it wants to sell its 30 percent stake in the concern.

But what have all the changes meant for the people working on the assembly line? We'll look at that in our next part.