The biggest Czech car maker and one of the country’s biggest exporters, Škoda Auto, is preparing to cut production of gear box and transmission systems from four to three shifts in preparation for a downturn in demand, unions at the German-owned company say.
The preparations have been outlined in a union paper covering at the company. Workers’ representatives say that the steps copy those taken at the start of the 2008 collapse in demand for cars and worldwide downturn in the sector. Škoda Auto’s spokesman was not immediately available for comment on Thursday.
The company produces transmission systems not just for its own models but for other units in its German parent company, Volkswagen. Last year Škoda Auto produced just over 534,000 transmission system units.
Workers’ representatives say that the steps copy those taken at the start of the 2008 collapse in demand for cars and worldwide downturn in the sector.
Unions say the latest plans to cut production follow on from the announcement at the end of September of reduced shifts for engine production due to reduced demand at Volkswagen’s plants in Latin America for the three-cylinder engines produced in the Czech Republic.
In 2010, Škoda Auto produced just over 518,000 engines at its main Mladá Boleslav plant north of Prague, around half of them were the three-cylinder 1.2l engine, whose overall production has been slipping compared with the firm’s newer alternative.
Škoda Auto announced Thursday a 16.8 percent rise in sales to 664,800 units for the first nine months of the year compared with the same period in 2010, adding that it posted its best ever September sales figure.
But even these impressive figures show signs that the boom earlier in the year in petering out. First half sales revenue were up 25.7 percent compared to H1 2010 with an 81.5 percent rise in operating profit and 20.1 percent increase in production. Škoda Auto’s sales revenue for H1 2011 reached €5.4 billion for an operating profit of €412 million and pre-tax profit reached to €388 million.
The car producer has set a long-term target of at least doubling its car sales worldwide by 2018 with the company putting particular emphasis on the potential for boosting its fast-rising sales in its biggest market, China, and other fast ending markets, such as India and Russia.
Škoda Auto’s plans to curb production represent an extremely worrying signal for the high-exporting Czech Republic. The Ministry of Industry and Trade (MPO) warned last week in a response to signs of slowing industrial growth that the evolution of the car sector would be crucial for the country’s manufacturing performance in the months to come.
“The declining trend of new orders growth gives the impression that the next months could bring a significant slowdown in [growth] developments so far,” the ministry said.
Figures for industrial growth in August showed a 5.9 percent rise compared with the same month in 2010, but stripped of exceptional factors, such as extra working days, the figures show growth slipping to 3.5 percent from July’s 6.8 percent.
Motor manufacturing hub
As well as Škoda Auto, the Czech Republic also has a Toyota, Peugeot Citroën (TPCA) joint venture car plant at Kolín that produced 295,712 cars in 2010, an 11 percent drop on 2009 blamed on the withdrawal on old for new car trade-in incentives across Europe. Around a quarter of the smaller models produced at the plant are sold in France, prompting protests in the past from French President Nicolas Sarkozy at the fact that a foreign-sited French company joint venture existed at all at the expense of local jobs.
The third and newest Czech car plant is Hyundai’s plant in the far east of the country. The unit of the South Korean car giant announced mid-September that it had started a third working shift at the plant two weeks earlier than originally planned because of continuing strong demand for its output. It said the third shift would mean 800 more direct jobs at the plant and another 1,200 extra jobs at sub-contractors mostly located in the region.
The Hyundai plant produced 200,135 cars in 2010, a 70 percent rise on the 118,000 made in 2009. Exports account for 97 percent of sales with the main markets being Germany, Britain, France and Israel.
Car production in Europe slumped by 13 percent in 2009 following the 2008 recession, the lowest level for 14 years. The Czech Republic fared better than most other producers with output actually rising 3.0 percent although some analysts said their warnings about the country being too reliant on the auto sector had been proved correct.
