* Skoda overtakes Fiat in eastern Europe
By Kevin Done
929 Words
6108 Characters
02/03/98
Financial Times
London Edition
27
Stories
Copyright Financial Times Limited 1998
* Skoda, the Czech subsidiary of Volkswagen of Germany, has overtaken
the Polish operations of Fiat of Italy to become the leading car
producer in central Europe.
Output increased by 35.8 per cent to 357,405 units last year,
exceeding for the first time the 329,000 cars produced by Fiat Auto
Poland.
* Skoda is expected to stretch this lead with plans to increase
production to more than 400,000 cars this year and to more than 500,000
in 2000, helped by the launch of new products.
It is a level and diversity of output never achieved in the communist
* era, when Skoda cars were assembled in part by prison labour.
The company is being radically restructured, as its products gradually
absorb VW technology and new manufacturing facilities are built at its
Mlada Boleslav plant north of Prague.
* A third range of larger Skoda cars, aimed at taking the company
further upmarket, is under development for launch in 2001/2002.
It will be based on the Volkswagen group's so-called B chassis
platform, which already supports the Audi A4 and the VW Passat executive
cars.
* Skoda is also expected to replace its best-selling Felicia small car
in late 1999 with a new model based on a common chassis platform with
the VW Polo.
Growth last year was driven by the introduction of its second range,
the Octavia family car launched in 1996.
Octavia production, supported by strong demand in export markets, is
set to double this year to around 120,000 and an estate car version is
to be added in the spring.
The assimilation of the core of the old Czech car industry into the VW
group has been scarred by periodic friction between the hard-nosed
regime of Ferdinand Piech, VW chief executive, and the Czech government,
which retains a 30 per cent stake.
But despite occasional misgivings in Prague about handing control to
* Germany of one of its biggest industries, Skoda has emerged under VW
management as a key element in the Czech economy's transformation.
Several of the leading Czech industrial groups still under domestic
control continue to falter under heavy debt burdens and half-hearted
restructuring.
* But Skoda Auto -- under VW control since 1991 -- has become the Czech
Republic's biggest company by turnover and its biggest exporter.
It has also become the magnet for attracting a large number of western
automotive components suppliers to invest in the Czech Republic and
develop a flourishing components sector.
* Skoda production has been increasing by between 20 and 35 per cent a
year for each of the past three years, and the company has moved
strongly into profit, as it starts to reap the benefits of growing
investment in new products and in expanded production capacity.
Net profits, to be announced in March, are expected to exceed Kc2bn
($56.66m) on a turnover of more than Kc85bn compared with Kc163m
* achieved on sales of Kc59bn in 1996, when Skoda ended several years of
losses.
* Skoda Auto, which is selling its products in 70 markets worldwide, is
leading the VW group's push into east European car markets, but it has
also become a standard bearer for Czech foreign trade, as the country
struggles to reduce a still yawning deficit in the current account of
the balance of payments.
* Skoda sales rose 29 per cent last year to 336,334 units, with more
than 70 per cent exported, most importantly to Germany (30,097),
Slovakia (28,723), Poland (27,881), Italy (22,336) and the UK (16,639).
Sales in central and east Europe (including the Czech Republic) rose
24 per cent to 168,844 units last year, while sales in west Europe
climbed 39 per cent to 125,338.
Domestic sales could weaken this year from the 100,459 achieved in
1997, with the Czech economy under pressure, but the devaluation of the
* Czech currency is helping Skoda's competitiveness in export markets.
Residual suspicions in Prague about the motives of VW's top management
in Wolfsburg were fanned again last month by the German carmaker's move
* to take a special dividend out of Skoda by lowering its basic equity
capital by DM500m ($273.5m) on the grounds that the company was
overcapitalised.
Criticism was softened, however, by the fact 30 per cent of the
special dividend -- reflecting the size of the remaining Czech state
shareholding -- is going into Czech government coffers, and the
government has also received assurances about VW's commitment to further
* expansion of Skoda operations.
Around DM2.1bn was invested between 1991 and 1997, and a further
DM2.4bn is planned from 1998 until the end of 2002. Work has already
begun on the construction of a new metal stamping plant.
VW is also seeking to expand the assembly operations of its Czech
subsidiary to other countries with feasibility studies and negotiations
under way for possible projects in Russia, India, Egypt and Bosnia, the
last one using the old VW plant in Sarajevo.
In Poland, where sales jumped by 76 per cent last year to 27,881,
* Skoda is preparing to upgrade production at the VW plant in Poznan to
full CKD (completely knocked-down) kit assembly over the next two years.
* At Mlada Boleslav Skoda is working at close to full capacity with
three-shift working in many operations and negotiations with the unions
under way on a repeat of last year's heavy schedule of extra Saturday
shifts.
The workforce has grown from 18,000 to around 20,000 in the past year
to cope with the jump in production, but with a tight local labour
* market Skoda is having to import a growing part of its workforce and is
currently employing around 2,600 foreign workers, chiefly from Poland.
Kevin Done
I0607 * End of document. |
