Skoda: An Eastern European Success

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.
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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 actu-ally 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.

In 1999 a second assembly plant covering 40,000 m2 was completed at a cost of $300-million. The Fabia is built there. The plant features the VW Group's newest press shop that includes two transfer presses and two solder presses; a blanking line is currently being installed. The press line can produce up to 14,000 parts per day, some of which are destined for other plants.

There are a number of showpiece items in the press shop including the Mueller Weingarten 2,000-ton press, which combines all operations so that a flat sheet being fed in one end emerges as a complete pressed part at the other, and a 5,900-ton Schuler press that manufactures the doors from blanks. It can produce up to 9,500 parts a day according to demand, and can operate from between 7 to 14 strokes a minute depending on the complexity of the part. One of the biggest improvements in the new operation is that tool changes now take just 10 minutes compared to the 3 hours that it used to.

Skoda's Rise
Average daily production1997199819992000
Mlada Boleslav80975348841
Mlada Boleslav--45650
Mlada Boleslav246428474471

There are a number of small but significant features in the press shop that have been introduced to enhance overall quality. For example, buffalo skin conveyors are used in some sections to eliminate scratches and for a longer life; plastic rather than wooden logs are used in the machine tool changing process to reduce the amount of dirt; there are washers and lubricants at the start of every press line to remove all traces of dust.

The Fabia assembly hall is unusual, as the bodies-in-white are pinned to a wheeled wooden platform on four mounting points and are thus carried around the plant from station to station–in reverse until fully assembled. This is done as it helps the operators install various components, such as the instrument panel, that can be pushed into the body against the flow of motion.

The assembly hall boasts a total of 1,800 people who work on a three-shift system; last year they produced 175,780 new Fabias for sale in 70 countries worldwide. In fact, last year was a record for Skoda, with a total of 450,910 vehicles being produced at the three Czech plants, a 21.5% increase on the year before. It also represents a giant step from 10 years ago, when Skoda was producing 172,074 vehicles a year.

This expansion, though, looks set to continue. Skoda began the construction of a new engine plant in November, 1999, with the production of transmissions for the Fabia line coming off the line just 10 months later. The plant is destined to play a vital role in Skoda's production goal of 500,000 units annually. Once the new 80,000-m2 facility has been completed, it will be able to produce 500,000 engines and 500,000 transmissions annually for Skoda vehicles and other VW brands.

All this is a far cry from even 10 years ago, when Skoda looked to be on its last legs. It was a huge gamble for the VW Group to invest substantial resources in the broken Czech company, but it is now paying dividends. Last year, for example, it enjoyed its strongest growth in Western Europe with sales of 229,109 vehicles, a 19.2% increase on the year before, the UK alone registering a 31.8% increase to record 30,509 vehicles and Germany a 15.9% increase with sales of 65,219 vehicles.

Even though Skoda is a European brand that will never be marketed in the U.S., it is nevertheless one to keep on the radar scanner.