Domestic companies in the Czech Republic’s automobile industry will cut up to 10,000 jobs between 2008 and the beginning of 2009, according to an estimate by the Automotive Industry Association. A few months ago, the association had envisaged a much smaller number of redundancies in the industry in the region of three thousand job losses. However, according to some experts, the current financial crisis is more likely to affect suppliers rather than automobile manufacturers.
Dramatic downturn in automobile industry
The global financial crisis has had a considerable impact on the Czech Republic’s automobile industry – the pride of and the driving force behind the Czech economy for the past 15 years, comprising 23% of Czech industrial production and exports. For example, the company Škoda Auto (Škoda Auto a.s.) has repeatedly announced production stoppages and reported a decline in profit for the past three quarters, ranging between CZK 250 million (about €9.4 million as at 18 December 2008) and CZK 8.66 billion (€326.5 million).
Causes of current situation
Companies in the automobile industry have also been complaining for quite some time about the strong Czech crown (CZK) and high energy prices. Member companies of the Automotive Industry Association (Sdružení automobilového průmyslu, SAP), for instance, have lost about CZK 21 billion (€791 million) due to the strong exchange rate of the crown, high energy prices and other unanticipated costs. According to the results of a survey carried out by SAP in August 2008, one in every five Czech companies that are members of SAP is considering reducing its workforce. The survey found that companies are unable to plan ahead because of uncertainty regarding the deadline for implementation of the euro.
In October 2008, SAP and the Czech Metalworkers’ Federation KOVO (Odborový svaz KOVO, OS KOVO), the largest trade union organisation in the Czech Republic, presented a joint declaration to the Czech government (Vláda České republiky) expressing their dissatisfaction. They demand that the government respond as quickly as possible given the global economic recession, which is already having a negative impact on Czech industry. Possible solutions put forward by SAP and OS KOVO include putting a stop to preparing and adopting legislation and measures that will lead to companies incurring greater costs, becoming less competitive and thus being forced to dismiss employees; this refers, in particular, to the respective EU measures that include stricter environmental constraints.
The Vice-President of SAP, Jiří Černý – also Vice-President of the production division of Toyota Peugeot Citroën Automobile (TPCA) – believes that high wages constitute a particular problem in the automobile industry. As a result, Mr Černý recommends that employers think strongly and maintain a coordinated position in relation to further wage increases – especially at a time when companies have begun collective bargaining for 2009.
Impact on employment
The President of SAP, Antonín Šípek, warns that as many as 10,000 workers in the automobile industry could lose their jobs over the coming months – a view shared by other people in this field. At the time of writing, about 128,000 people were employed in the industry, and to date job vacancies have been advertised in the automobile industry.
According to some experts, the current financial crisis is more likely to affect suppliers rather than the automobile manufacturers themselves. Problems have already begun to emerge for a number of domestic suppliers from various sectors. The Brano Group (Brano Group, a.s.), an important supplier for automobile factories, has made 250 employees redundant so far this year. Other companies have either reduced their workforce or recorded a decrease in supplies. Among the companies that are cutting jobs are Bosch Diesel (Bosch Diesel s.r.o.-Jihlava), Hella Autotechnik (Hella Autotechnik, s.r.o.), and Saar Gummi Czech (Saar Gummi Czech s.r.o.). The company Motorpal (Motorpal, a.s.) has already decided not to extend employment contracts concluded for an indefinite period of time.
Economic outlook
According to Pavel Juřička of the Brano Group, problems in the automobile industry will last for more than a year, during which time many changes can take place. The majority of manufacturers are owned by multinationals, which in turn are also having problems in their home countries. SAP President Mr Šípek warned that: ‘They can begin winding down production in the Czech Republic and moving it to their own countries to maintain employment levels there.’ The Czech automobile supplier industry also competes with Romanian and Turkish suppliers. Manufacturers in these countries are reportedly managing to successfully assert themselves among automobile suppliers.
On a more positive note, Mr Juřička pointed out that: ‘The automobile industry is, however, dependent on experts, so I believe that we will be able to maintain our position.’ SAP even forecasts that growth in the automobile industry will rise by 1%–2% in 2009. The automobile manufacturer TPCA increased production this year. Meanwhile, the Hyundai factory in Nošovice in the east of the Czech Republic (Hyundai Motor Manufacturing Czech, s.r.o.), which started production recently and which is still hiring workers, should manufacture over 10,000 cars this year. Truck manufacturers, on the other hand, saw production fall on a year-on-year basis.
Jaroslav Hála, Research Institute for Labour and Social Affairs (RILSA)