Business Škoda Auto victory over SEAT announced for key investment

11-03-2014 15:39 | Jan Velinger

The Czech Republic and local car maker Škoda Auto appear to have won the battle with Spain and auto maker SEAT to build a new large sports utility vehicle. Strong behind the scenes lobbying by Czech Prime Minister Bohuslav Sobotka has been one of the factors in the Czech campaign to land the investment.

Illustrative photo: Škoda AutoIllustrative photo: Škoda Auto Czech daily Mladá Fronta Dnes reported Tuesday that Škoda Auto’s east Bohemian factory at Kvasiny had been selected by the Volkswagen Group to manufacture the new model over a rival bid from SEAT’s Martorell plant in Barcelona. Dnes cited several well informed sources from the Czech car maker and its suppliers for its story, adding that an official announcement would be made later on Tuesday or on Friday.

Czech Prime Minister Sobotka is due to visit Volkswagen’s headquarters in Wolfsburg, Germany, on Friday and the around 10 billion crown investment should also be raised with German Chanacellor Angela Merkel during the same trip. Sobotka said on Czech Television’s flagship current affairs programme on Sunday in connection with the Škoda Auto investment that it was of the upmost importance to get new job opportunities for the country.

Rumours that Volkswagen bosses had already selected Kvasiny over Martorell already leaked out at the start of the year. SEAT’s local bosses insisted back then that the race was still on. While Spanish unions argued that only Czech wage costs are lower other factors could inflate the bill for production at Kvasiny and that Volkswagen had in the past shifted production to Slovak capital Bratislava and later come to regret it when production costs overshot expectations. Some of the blow for the Barcelona plant might be cushioned by the fact that a new line of night time production was launched at the start of this month and around 450 temporary workers taken on permanently thanks to soaring sales of the Leon and Ibiza models.

For Kvasiny, the preparations to launch production of the new model, so far dubbed ‘the snowman’ from 2016 or 2017 would be a turnaround in the fortunes of a plant that has long been the poor sister of the main Škoda Auto plant at Mladá Boleslav. Kvasiny, the youngest of Škoda’s three plants, currently manufactures the top of the range Superb, the Yeti, and the Roomster. The future of the plant, which employs around 4,500, and produces around 150,000 cars a year has often been called into question over recent years.

For Škoda Auto, the Kvasiny investment would also make much more tangible board chairman Winfried Vahland’s vision of the Czech carmaker producing 1.5 million units worldwide by 2018.

That ambitious target came under fire only last week when auto sector research company IHS Automotrive said that Škoda Auto would be hard pressed to exceed the 1.16 million production mark within four years. Last year, the carmaker saw sales slip to 920,800 compared with 939,200 in 2012. The company says that sales should be boosted from 2016 onwards with the expected unveiling of a new model every six months.

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