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Volkswagen Bratislava begins major expansion

Jaroslav Holeček, Volkswagen Bratislava's personnel chief, is growing accustomed to hearing the word "impossible" as he leads his company's drive to find thousands of new employees to staff an ambitious expansion program for 1998.
"We have activities that depend more on people than elsewhere," said Holeček. "We're producing the most sophisticated cars in the VW Group. They are labor intensive and require skilled people."
Economic analysts say that Holeček has his work cut out for him. VW's current work force is about 5,000 people, and the company wants to expand to 7,000 employees by the year 2000. Given the immobility of Slovakia's workforce and the fact that VW's compensation package is not exceptionally good, analysts argue, the company may have problems pushing through its planned production hike.

Jaroslav Holeček, Volkswagen Bratislava's personnel chief, is growing accustomed to hearing the word "impossible" as he leads his company's drive to find thousands of new employees to staff an ambitious expansion program for 1998.

"We have activities that depend more on people than elsewhere," said Holeček. "We're producing the most sophisticated cars in the VW Group. They are labor intensive and require skilled people."

Economic analysts say that Holeček has his work cut out for him. VW's current work force is about 5,000 people, and the company wants to expand to 7,000 employees by the year 2000. Given the immobility of Slovakia's workforce and the fact that VW's compensation package is not exceptionally good, analysts argue, the company may have problems pushing through its planned production hike.

Production jump

VW is tripling car production this year to 120,000 units at its plant in Devínska Nová Ves. "We would like to produce 1,000 cars per day," said Tomáš Kuca, VW Bratislava's spokesman. To accommodate its expansion, the company will break ground for a new building on September 21, 1998.

The key to VW's plans for Slovakia is employees. Holeček said that "over the next two years, we should be able to find 2,500 [workers]," but admitted that hiring workers on such a massive scale was a daunting task. For every 1,000 new hires, he said, the human resources department must conduct 2,000 interviews. That means in turn that 3,000 people must take the company's skills test out of a total of 6,000 applicants.

Vladimír Zlacký, an analyst with investment bank ING Barings, said that the relative immobility of the Slovak labour force might interfere with VW's plans. "Labour is not mobile in Slovakia because of the difficulty of getting housing," he said. "Of all of the structural reforms the economy needs, increasing workforce mobility is one of the most crucial."

Zlacký predicted that VW would face problems in getting its new workers. "They could do it, but the transaction costs [of providing the necessary housing] might be high enough to hinder production," he said.

VW's prodigious appetite for new workers is forcing the company to cast its net well beyond Bratislava. In 1995, more than 62% of its employees were from the city of Bratislava. By 1997, this figure had dropped to 36%.

VW uses a fleet of 20 buses to bring in workers from towns outside of the city to work the factory's three shifts. "It's a problem, but we want to do business so this is the solution," said Holeček. About 30% of VW's workers use this transport system, while another 30% are accommodated at company apartments.

The problem of finding new employees is compounded by turnover among existing workers. Holeček said that although Volkswagen is finding new employees readily enough, it has trouble keeping them on its spotless assembly line. The annual turnover rate is about 17%-18%. "I think we must improve our capability to create a strong bond," Holeček said.

Some observers pointed to VW's wages as part of the problem. The starting salary in Bratislava for a line worker is 10,000 SK, and the average salary, excluding managers, is 15,400 SK. "Compared with Slovak enterprises and factories, especially outside of Bratislava, [VW's wages are] still attractive," said Jan Menkyna, Senior Consultant of Management Consulting from the recruitment firm Management Consulting Jenewein Ltd. "But in comparison with other international companies, they don't pay above average [wages]."

Holeček, however, said that the problem lay with the employees themselves and the Slovak labour culture. "Our personnel are very young," he said. "The average age is 28, usually single. If someone offers [them] 500 SK more, they leave." The other problem, he said, was the nature of the government social support system in Slovakia. "The market has a very social heart and doesn't force people to work," he said.

Despite the bumps along the way, VW's massive expansion program shows no signs of slowing. The company's stated investment plan for 1998 is DM 173.6 million ($98 million), compared to DM 111 million in 1997. Sources within the Slovak government state that the 1998 investment amount will rise even higher to DM 230 million ($130 million).

Jenewein's Menkyna said he was optimistic that VW would reach its goals. "I think they will be able to do it," he said. "VW has a very good personnel [system], good methods for [using] assessment centers and job rotation principles. This way, VW also offers stability and opportunity for personal and professional growth, which in a production company is even more important than high starting salaries."


Jeffrey Jones is editor-in-chief of the Central Europe Automotive Report

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