Skoda: An Eastern European Success - history of the auto company - Statistical Data Included

Automotive Manufacturing & Production, June, 2001 by William Kimberley

We often think of Jaguar as rising phoenix-like from the brink of oblivion to the success story it is becoming today, but in terms of numbers--whether it be the number of cars built, the amount spent in investment, or the manufacturing processes- it pales into insignificance in comparison to Skoda.

Originally founded in 1895 by Vaclav Laurin and Vaclav Klement as Laurin & Klement to manufacture motorbikes, they turned their hand to making cars some 10 years later to become one of the founding fathers of the Czech motor industry. Not that it was ever to become a particularly large one--in 1938, for example, at the time of Nazi Germany's occupation, the country registered no more than 38,000 cars and output ran at around 10,000 units a year. Skoda accounted for 4,452, Praga 2,145, Tatra 2,098, and the little known Aero 1,277. Laurin & Klement? It had been taken over by Skoda, a flourishing engineering company that, amongst other things, had built the Hispano-Suiza luxury cars under licence in 1925.

To be honest, the cars Skoda pumped out up to this time could best be described as worthy but dull even though it boasted a range of cars that extended from a five-bearing 1,122-cc model, through two bigger "fours" and three "sixes" to a large straight-eight.

The downward slide began soon after the war ended, when the company came under state control. After a false dawn of some promising models, Skoda produced some of the worst models of the time, its rear-engined cars with swing-axle rear suspension and a build quality bringing tears to the eyes. Fitting into the cheap and cheerful index, there was a steady stream of exports destined for those bargain hunters who were prepared to pay good money for a set of wheels, no matter how bad they were. However, it established a reputation that even to today dogs the company, although the Skoda jokes of yore ("Why does a Skoda have a heated rear screen?" "To keep your hands warm when pushing it.") have virtually faded into history.

Despite everything that was wrong with Skoda, the Germans nevertheless saw something in it, and in April 1991 the Volkswagen Group acquired 30% of the company and gained full management control. Despite criticism at the time that it did not know what it was buying, Volkswagen obviously thought otherwise and bought a chunk more in December 1995 to increase its shareholding to 70%. In May 2000, it purchased the last remaining stock held by the Czech government. However, it has not come cheap--since its original stake, Volkswagen has invested more than $1.5 billion in the company with that amount committed for further investment up to the year 2003.

So what did it buy and what is it investing in? Throughout its past, the one dominant factor in Skoda's history has been the Bohemian town of Mlada Boleslav which is situated around 40 miles north east of Prague. However, while it is the principal plant with a workforce numbering just under 20,000, there are two other manufacturing sites in the Czech Republic, each employing around 1,300 people. The Vrchlabi plant concentrates on the manufacture of special equipment items such as airbags, and the production of limited-edition vehicles. It is now also the lead plant for the Felicia following its phasing out of Mlada Boleslav last year after eight years of production. The Kvasiny plant is responsible for all light commercial vehicles. During 2000, the Czech factories produced an average 1,673 vehicles a day. Skoda also has a plant in Poznan, Poland, where two models, the Felicia (93 units a day) and Fabia (44 units a day,) are assembled from SKD kits for supply to the local market. Felicias are also assembled in Sarajevo, Bosnia, as part of a wider Volkswagen AG project. Production is scheduled to start this year at an assembly plant in Russia as it will in India, where around 3,000 Octavias a year will be assembled.

For all this network of assembly plants, though, it is the sprawling Mlada Boleslav plant that is the mother ship, where the jewel in the crown is the Octavia assembly plant. An impressive structure of glass and steel--the building was designed by the well-known architect Dr. Gunter Henn and constructed by the Czech firm Vojenske Stavby--it is based on the concept presented in Professor Hans-Joachim Warnecke's 1990 work, "The Fractal Factory." "Fractal" is a mathematical term used to describe complex patterns as they exist in nature, where the structure of smaller and smaller fragments remains the same as the whole, with each part retaining the same information.

In the fractal factory, work is carried out by small teams working together. Individuals concentrate on the overall task rather than on the single parts of a task. This pattern is repeated throughout the whole manufacturing process and guarantees that the common aim of all the individual elements is the same as the overall aim.

Pre-assembled components feed into the central "spine" from the sides likes "ribs." Uniquely in Europe, four suppliers have production facilities actually within the plant, manned by their own staff. Johnson Controls, for example, makes the seats, seatbelts and runners, and Rockwell the doors, sunroofs, trim, and speakers. Siemens is responsible for the instrument panel, steering wheel, heater, airbags and pedals. And The Octavia's front end, which includes the bumper, headlamps, radiator, and grille, are handled by Expert. All other suppliers are linked to the production control system on a just in-time basis.