Wild ride - a different perspective on the Czech car industry

Submitted by Steven. on November 10, 2006

The following article was written by comrades from the Czech Republic. Following their analysis of the strike at Skoda they investigated the development of the car industry in the Czech Republic more thoroughly, concentrating on Škoda/Volkswagen, TPCA (Toyota Peugeot Citroën Automobile) and the suppliers.

Wild Ride - A Different Perspective on the Car Industry
From the working class viewpoint, the post-1989 transformation was so fundamental that it can be compared only with the industrialization of the second half of the 19th century or with the building of postwar Stalinism. The working class is changing profoundly, at least in its technical composition. We will not be able to identify any link between the technical and the political composition until some struggles arise and reveal such a link. In the 1990s the de-industrialization of traditional industrial regions in the Czech Republic (northern Moravia, northern and central Bohemia) began and was accompanied by large-scale lay offs. The ground was prepared for a massive influx of foreign investment that took off at full speed after 1998 (with the ascension of the social-democratic party to power).

Within a few years the car industry became the key sector for the accumulation of capital in the Czech Republic. Two main car manufacturers - Škoda/Volkswagen (with its main facilities in Mladá Boleslav, Vrchlabí and Kvasiny) and TPCA (Toyota Peugeot Citroën Automobile in Kolín) - formed the backbone of this sector, with a significant number of new supplying firms clustering around (for instance Bosch, Behr, Visteon, Continental, Siemens).

The suppliers do not produce solely for the domestic car manufacturers, but are both part of traditional car production chains in Western Europe and new car factories in the east, for instance those set up in Slovakia (Volkswagen, PSA, Kia). Recently the South Korean corporation Hyundai announced that its first European factory would be built in Ostrava. These companies are either expanding their production in the Czech Republic, or they actually shift it here from Western Europe.

The car industry amounts to about 20 percent of industrial production of the Czech Republic. Overall 85 percent of car production is intended for export, which makes up 21 percent of the total Czech export. More than 130,000 workers are employed in the car industry. In certain regions (Liberec and its surrounding areas, or Southern Bohemia) this sector comprises more than 75 percent of all investments. In the Liberec region 91 out of 100 crowns invested goes to the car industry – a concentration that is clearly motivated by the proximity of Mladá Boleslav.

Supplying firms form the most important part of the Czech car industry. They employ more workers and, taken as a whole, they reach higher revenues than the actual car producers. They take a 56 percent share of the sector's production. These companies manufacture not only for the car factories in the Czech Republic, the main portion of their production is directed to other EU countries. For example, Ford, which does not have any direct production established here, uses components delivered by about 30 companies based in the Czech Republic. In 2004, Volkswagen (not including Škoda Auto) was delivered components worth one billion euros. Some of the supplying firms are Czech based, the majority, however, were established through extensions or shifts of production from abroad.

The lack of qualified workers has lately become the major problem for the car industry in the Czech Republic. It is presented as the main obstacle to its further development. Many workers in the newly constructed plants come not only from Slovakia, but also from the Ukraine and some even from Poland. The dismantling of the welfare state is aimed at forcing people to work, in these plants among others, people who have hitherto refused to do so because of the work's crushing nature and low wages.

Škoda: "A discontent in the locality"?
Contrary to Volkswagen itself, Škoda does not seem to be facing any major problems. In 2004 it reached a record profit of 3.5 billion crowns (in 2003 it was "only" 1.48 billion), Whereas in 2001 the company had to impose obligatory leaves of absence and suspend production because of insufficient sales, this year, on the other hand, it imposes extra-shifts (accepted by the trade-unions) in order to meet allegedly increased demand. At the same time the management members admits that the main causes for the record profits in 2004 were the reduction of costs and changes in logistics (for instance reducing the stock of reserve supplies), rather than a good market situation.

Sales in 2004 went up only marginally from the previous year (451,675 vehicles sold in 2004 as opposed to 449,758 in 2003). In the Czech Republic and Central Europe Škoda even encountered a drop in sales; the increases come from better sales in Western and Eastern Europe and in Asia. The Octavia model was the one driving the sales up, all other models (Fabia, Fabia Combi, Fabia Sedan, Octavia Combi, and Supereb) dropped in sales. Škoda hopes to increase its sales more significantly by introducing its new Roomster model that is to be produced in the Kvasiny plant starting 2006.

Škoda is the biggest Czech exporter, just as it is one of the biggest employers. It's main facility in Mladá Boleslav is supplemented by factories in Vrchlabí and Kvasiny in eastern Bohemia. In Mladá Boleslav and its surroundings it is not only the main employer, but virtually an industrial centre, around which revolves the entire life of the town. At the end of 2004 the plant employed 24,561 people, 20,897 as permanent staff. The majority of employees work in Mladá Boleslav, since Vrchlabí and Kvasiny Škoda employ just about 2,300 workers altogether. A significant number of workers come from Slovakia, a part of them even from Poland. It is these workers who are very often hired by recruitment agencies and who were used in the past as a "shock absorber" during occasionally occurring lay-offs.

Škoda has opened assembly plants in Bosna (Sarajevo), Ukraine (Uzghorod) and in India. It is planning to open an assembly line in Kazakhstan, a big one is also expected to be built in China (Shanghai). Škoda’s most optimistic prediction for its Chinese production, to begin in 2007, is just 40,000 vehicles per year. The plant is expected to employ 5,000 or 6,000 workers. In India, as well as the Octavia model, also the Superebs are assembled, and Fabias are under consideration.

All these Škoda plants abroad do not function as independent production units. They are, in fact, dependent on exact and timely supplies of component parts from Mladá Boleslav. In this main factory there is a final assembly line (as is the case with TPCA in Kolín), but it also produces engines, transmissions and other components. These components are made not only for Škoda purposes and its assembly plants abroad, but also for the rest of the Volkswagen corporation. The "supplying" character of Mladá Boleslav facility looks likely to increase.

In 2004 Škoda had 153.5 billion crowns in revenue. Most of it was made abroad. Before the launch of TPCA, Škoda was responsible for 8 percent of the exports from the Czech Republic. The biggest markets for Škoda products are in Germany, followed by the Czech Republic, Slovakia, Great Britain, Italy and Poland.

Dozens of supplying firms are connected to Škoda's production and in 2004 they delivered parts worth 1.8 billion euros, 400 million more than the preceding year. There are speculations about using more suppliers from other parts of Eastern Europe in the future. That is where many companies settle after not finding enough qualified workers in the Czech Republic anymore. The suppliers operating in the Czech Republic cover 60 percent of Škoda's demand.

In spring 2005 there was a three-hour strike at Škoda (each shift was on strike for an hour).1 In Mladá Boleslav it was accompanied by a demonstration of 10,000 people. The main demand was a wage-increase in the light of the company's record profits. Škoda's bargaining power was diminished by the lack of a qualified workforce that had begun to be felt by the Czech car industry and by the necessity of keeping up continuous production at a time when Škoda was doing relatively well. The management made concessions and approved a 7 percent wage increase, maintaining the 13th annual salary, increases of bonuses for afternoon/night shifts, and the payment of lump-sum bonuses.

Even though the workers' starting position was strong, this conflict did not extend beyond the limits set by the trade-union leadership. The only conflict that developed beyond such limits was a "wildcat" work-stoppage in June 2000, when several hundred workers in the Fabia's welding shop in Mladá Boleslav protested against unbearably high temperatures in the shop. In October of the same year there was a protest meeting of workers from Fabia's assembly and expedition lines, targeted against work overload at the production lines. There was one more protest meeting at the same place and for the same reasons in July 2001. At the beginning of 2003 workers repeatedly refused to come to work for extra night shifts. The whole thing, however, was more about trade-union tactics for collective bargaining, than an expression of autonomous workers' resistance. Nonetheless, even back then the trade-union representatives warned against a "discontent in the locality" that could be accompanied by an intentional destruction of cars by the workers.

TPCA: "Work shall be blessed"
Škoda has been making cars for decades and Volkswagen only took over in 1991 and "modernized" it. TPCA, on the other hand, is a typical example of a factory built on the "green field" close to the town of Kolín. In the fields adjacent to the factory an obelisk was raised displaying a car and an inscription in Latin "Ut sit labor" ("Work Shall Be Blessed"). Originally a BMW plant was supposed to be erected there. However, BMW eventually decided to build the new factory next to Leipzig in Germany. The way to Kolín was thus opened for the consortium of Toyota-Peugeot-Citroën. But TPCA was not merely following the cheap labor force. It was granted generous incentives from both the state and the town of Kolín. The town agreed to pay not only the complete development of the industrial zone, but also the costs of traffic route extensions, sound barriers and other environmental compensations. It also pledged to build new housing units and other adequate infrastructure. As a result of all of this Kolín incurred debts of hundreds of millions of crowns that it will not pay back till 2019. The state committed itself to speed up the construction of the D11 highway which, together with a feeder road made specifically for TPCA, should become the vital thoroughfare for the factory. Altogether, the state agreed to provide incentives equaling 15 percent of the value of the entire investment.

TPCA's decision to invest 23 billion crowns was major news for many months: the terminology employed included "the biggest investment", "the most modern car factory in Europe", "rescue for the unemployed", even a "rescue for the eco­nomy". In Kolín itself housing prices went up immediately, the schools competed in offering educational adjustments fitting the factory's needs, the local press was covering constantly all the events regarding the plant.

When production started in spring 2005 it became clear that its effects will be anything but miraculous. Already during the construction period the noise from passing trucks became so unbearable to citizens of Velký Osek (one of the small towns adjacent to the factory) that they threatened to block the transport routes. In one part of Kolín, where new flats for TPCA workers and a Tesco hypermarket were being built, people actually did take to the streets and organized a blockade. In another part of Kolín, the residents of Ovčárecká street founded a non-governmental organization and used it for legal battles against noise pollution, water vanishing from wells, and other negative environmental impacts of the factory. Their street became a main exit-road for TPCA. At first TPCA refused to pay any compensation, because it could create a precedent case for other routes through which the plant is supplied. However, when the NGO threatened to bring up some discrepancies with building permits, the town hall retreated and allowed the resident to have their windows soundproofed, their walls insulated; and it agreed to build noise blocking walls around the road. Even though the town of Kolín is paying for these alterations, there are rumors that TPCA is actually the source of money. So far, all conflicts have been resolved peacefully. Nonetheless, there has been a lot of tension accompanying the plant since its very beginning.

When the production will reach full capacity, TPCA should produce 300,000 cars per year, that is 100 cars per employee. At first sight it is a big number, especially when compared to 18 cars per employee at Škoda. The high number of cars produced per employee in TPCA could be partially put down to new methods of the organization of work and production, namely exerting more pressure on the workers. At the same time, we have to understand that TPCA only does the final assembly of cars, whereas in Škoda there are also production facilities for engines, transmissions, and other components. According to official figures about 75 percent of components for TPCA come from suppliers based in the Czech Republic. One truck can contain 10.5 cubic meters of components. When the production runs at full extent, 1,100 fully loaded trucks will have to supply the factory everyday. More than 100 supplying firms (about 60 of them Japanese and a similar number of them from Western Europe) followed TPCA to the Czech Republic. However, they have the intention to work not only for TPCA, but also for Škoda and some other car factories that are about to begin production in Slovakia. About 70 to 80 percent of TPCA's production should be exported via railroad (95 percent of the entire production is destined for export).

The assembly line in TPCA is organized in such a way that one Toyota Aygo, one Peugeot 107 and one Citroen C1 leave it one after one, one car every minute; 1,100 cars every day (this level should be achieved by spring 2006). Any worker at any part of the line has the capacity (indeed, an obligation according to the internal norms of the enterprise) to stop the entire line immediately upon discovering a defect. The point of the measure is to involve the workers in the quality control process. Whereas at the moment it is integral to their exploitation, will they be able to use this competence against capital?

Another significant element in the organization of work is a very advanced standardization of workers' operations. It reflects the aim of a smooth and conflict-less production process. The management goes so far as to make their workers pass training on how to hold a hammer correctly to render their operation more effective.

The rate of unemployment in Kolín, which has been over 10 percent for years, remained almost unaffected by TPCA's start. Even though, at first, the deep drop of the unemployment rate in Kolín was one of the main propagandistic promises. In the end, only about 40 percent of the employees come from Kolín and its surrounding areas. In the traditionally "well-off" region of Central Bohemia it is hard to motivate enough newcomers by 14,000 Czech crowns of gross salary. The majority of workers come from northern Moravia, Slovakia and Ukraine. Even though TPCA organized a massive recruiting campaign in the areas most hit by high unemployment, it still had problems to find a sufficient number of employees. TPCA did not even ask of the new employees to be adequately qualified and was offering on-the-spot training.

The first shift was recruited within a reasonable time-frame; however, recruiting for the second shift took significantly longer and the third one was completed only in October, 2005. 3,000 jobs were planned, but so far there are only 2,400 employees (TPCA was said to create 10,000 jobs if we count the suppliers). After all three shifts were formed, the working teams were mixed in such a way as to have the same proportion of experienced and new employees in every shift, apparently in order to keep the same level of productivity in each shift.

When just the first shift was operational, the work was only four days a week, but it was from 6:30 am till 5:11 pm. The curious working hours were derived by dividing the working hours for shift based enterprises, 38.75 hours weekly, by 4. With all three shifts in place, the factory is running 6 days a week, with a break from Saturday 5:11 pm till Sunday 6:30 pm.

One of the main ways to make the jobs seem attractive was the possibility to get a company flat. The Kolín township committed itself to building 850 of them. The delays in the construction, however, resulted in the fact that many workers had to live in very inadequate dormitories (one cabinet in the room, shared bathrooms in the hallways) and pay about 3,700 Czech crowns for one bed in three- to four-bed rooms. TPCA contributes 1,500 Czech crowns for accommodation, another 500 Czech crowns for commuting. If an employee decides to move to Kolín with the whole family, it offers a one time contribution of 10,000 Czech crowns.

The problems with accommodation are said to be one of the main reason why every month about 50 or 60 people leave the factory. Nonetheless, we should not ignore the extreme amount of stress the workers are confronted with.

"I seriously don't like to change jobs, but at this point I am even unable to solve a cross-word puzzle. And in no time I would become a total jerk", one young female worker said about the reasons that lead her to leave the job. She is a graduate of a business college who used to work for a car dealer until she was lured by TPCA's campaign, that promised an entry-level wage of 16,500 Czech crowns, a flat and a whole-life perspective. Now she lives in a dormitory, because with the gross wage of 14,000 Czech crowns she cannot afford a flat for 8,000 Czech crowns. She works at the components' quality control line. When a component arrives, she puts an iron hook at the weld spot and hits it with a hammer. If the weld does not break up, the component can go further along the line. "I am required to hold the hammer in the left hand and the hook in the right one. There is no way I could switch hands. If I did a monitor would appear and warn me that I am breaking the rules of the work operation." If the line stops and it is not an official break, she has to keep working, that is she has to take a broom and sweep her part of the floor even if it is completely clean. If she would resist that procedure "they would send me a letter of rebuke stating I am not sufficiently conformable." When she returned to work after being sick for a month "they put me on a different job, among entirely strange people. Actually, I had to start from scratch." She described certain signs that are displayed in the shops, for instance: "I wear a cheerful, vigorous and smiling face." "They always make us socialize and communicate. In the end, the boss of our shop gets 10,000 crowns and we all go to a pub where we stuff ourselves with food and get drunk for the money destined for communication among employees." The system of permanent mobilization is leads to stupefaction and results in docility.

Other workers also criticize the organization and the speed of work. "It is an unbelievable drill; we place bolt nuts on the wheels, for one hour straight, always in exactly the same way. And we do it for only 14,000 crowns of gross wage, whereas in France the electricity industry and the car industry are among the best paid jobs." Such were the complaints of a 36 year old worker from eastern Bohemia. The quality of accommodation is also criticized severely; the workers do not have fridges or a kitchen-stove for cooking. They do not get to go out in town - at six they get to their dormitory and have no time, money or energy for a social life. The evenings spent in cheap pubs are the only means of relaxation. Another worker from Ostrava, who earns up to 20,000 Czech crowns monthly, spends 4,000 in a pub. Another 4,000 goes for the accommodation and trips back home where he brings 8,000 to feed the four members of his family. "I am only staying here with a vision of promotion. Maybe once we will have wages comparable to Škoda, when the trade union will kick in," he says.

Indeed, there is a trade union in TPCA already, but there is no need to succumb to any illusions about its nature - the founding of the OS KOVO local was actively facilitated by the plant's management. On the other hand, even commentators from the mainstream press agree that more demands for higher wages are only a matter of time. For example, during the strike in Škoda in spring 2005, the journalists immediately began to investigate the atmosphere in the TPCA plant in order to find out if similar a conflict would emerge there. It seems clear, following the workers' statements, that they are well aware of the fact that the wages at Škoda (or even in the car factories in the West) are somewhat better and the low wage level at TPCA cannot remain immutable.

More than 300 suppliers (at least two thirds of foreign capital) form the main part of the Czech car industry; in respect of their 56 percent share in the industry's output, number of employees, and share in total revenues. Japanese companies can illustrate this: of all 57 Japanese companies in the Czech Republic, 34 manufacture directly for the car industry and represent 70 percent of all Japanese investment here. It is said that every third German supplier has a facility in Eastern and Central Europe; there are 85 of them in the Czech Republic. There is a complex network of supplying firms connected at different nodes to the production chain making the sector quite vulnerable to disruptions.

Despite its importance, it is quite difficult to analyze the class composition in these firms. One of the reasons is their relatively obscure existence as opposed to the spotlighted whole-cars producers, which results in a lack of press and official coverage. Moreover, so far there have been no open struggles in supplying firms that could attract the attention of the press.

In many cases, these firms are working for Czech based car producers (Škoda, TPCA). However, they also supply other producers, especially in Western Europe. Strong ties are also emerging to Kia and PSA in Slovakia.

Among the biggest suppliers we can name Continental in Otrokovice (Moravia) that employs 4,500 workers and has become the biggest European producer of tires for personal vehicles. Another important supplier is Bosch, which makes components for diesel engines in Jihlava and employs 5,800 people. In another of its factories in České Budějovice there are 2,000 workers who make car components. Apparently the customers include all major European car factories, but a part of production is also exported to Asian and South American producers.

To name a few other suppliers in the Czech Republic, we can note Autopal in Nový Jičín that is owned by Visteon company and has 4,500 employees. Siemens Automotive in Frenštát (1,200 employees), Kiekert in Přelouč (1,400 employees); the list could go on.

Instead of a Conclusion
Much has to be done if we are to get beyond a mere "situation report" on the car industry in the Czech Republic or Central and Eastern Europe as a whole. Only a limited amount of information can be extracted from the official press and statistics, even though we could not advance without them. Light needs to be shed on where there are points of tensions and the technical composition of the industry. Is there a class recomposition underway? Direct inquires with workers themselves could help to breach this information barrier, while at the same time they could help to disseminate knowledge and share experiences among workers of various firms. At this point we can safely assert that since at least the end of the 1990s, the car industry has been the prime "industrializer" and the focal point of accumulation in Central and Eastern Europe. Sadly, that is the capitalist part of the story, and whether the sector is still central from the working class point of view, we cannot say.

1 See ppnews #2, 5/2005, article here

From prol-position news #5 | 2/2006