Volkswagen, the parent company of Czech car producer Škoda Auto, has one major trump up its sleeve – its operations in several countries – including the Czech Republic, Spain, Belgium, and Slovakia as well as Germany – means that it can shuffle its production capacity between them when needed.
Of course, most of the shuffling usually means moving production away from more expensive Germany to the other sites in Europe or around the world. But an eye, of course, has still to be kept on some of the main German Volkswagen shareholders and their sensibilities as well as the local unions.
Higher German labour costs are not that big a proportion of a car’s overall cost, though do eat into the manufacturer’s profit margins.
But the current success story of the Czech Republic’s biggest car maker means that Germany could now re-enter the picture as a possible location to take up some of the capacity strain on Škoda Auto. Škoda Auto’s current Czech plants are operating at full capacity just to try and keep up with demand – a fact that the unions pointed out this week as they began to make their case for a more than 10 percent double digit pay increase next year.
And the unions have also warned that one way for Škoda Auto bosses to solve the looming local capacity crunch could be to shift production to nearby Germany. In particular, they say that management are mulling whether production of the follow-up model for Škoda’s top of the range Superb could be sited in Germany, according to a report in the business weekly Hospodářské Noviny. Spare capacity at Audi car plants would be the most likely to benefit.
Other options are being weighed as well, according to the paper. These include re-timing the phase-in of new models and phase-out of old ones to create extra capacity. According to this scenario, this could see the Škoda Rapid dropped faster than first expected.
The new Superb follow up is not expected to be ready to roll off production lines any time before 2020, which still gives Škoda Auto management some time to play with but not much.
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