Skoda Auto Deals with Labor Issues

As Americans are coming to grips with its declining auto industry and attempting to seriously debate the issues of immigration and labor, it is interesting to take a look at how a plucky little car company in the Czech Republic is managing to boost both sales and profits while also having to deal with an intense labor shortage. The name Skoda Auto is a familiar one in the United Kingdom and Europe in general, but in the U.S. it is a complete unknown. Located in Mlada Boleslav, about forty-five miles from the capital city of the Prague, Skoda manufactured its first car in 1905 and is presently a member of the Volkswagen Group.

Skoda employs approximately 26,000 workers at three different facilities in the Czech Republic, and they recently successfully concluded labor negotiations that includes a variable pay raise that is based upon production. Skoda uses a system of employee teams, and the better the teams produce, the more money the team members make. They also increased wages for graveyard shift work and the weekends. Overall, it is anticipated that their payroll will go up 6% this year. But this figure is based upon a 10% increase in sales.

Skoda anticipates that this will allow them to improve the quality of their models, without having to raise sticker prices.

What this labor deal also does is to allow Skoda to invest in robots and further mechanization of the assembly process. Which will further increase production, which will then lead to higher bonus money for the employee teams on the line. That's the genius of this. It's in the employees best interests to accept and even invite the robots onto the line. But some may ask, won't that lead to lay-offs? And the answer is no. Well, it's no and yes.