Volkswagen Slovakia is facing hard times. Will it survive after 2022?

The production cycle expires in three years. The Bratislava car plant must prove to the German concern it deserves to produce e-cars.

Volkswagen Slovakia.Volkswagen Slovakia.(Source: Sme)

Igor Mišík has been working at the Volkswagen car plant in Bratislava for a year and half. In the last seven months, he has controlled the quality of the new SUV Volkswagen Touareg and Porsche Cayenne.

He is now one of the agency workers, who will lose their jobs this year. Mišík learned of this a few weeks ago.

Read also:Volkswagen will scrap 3,000 jobs by June Read more 

The plant is to lose 3,000 jobs in the next few months. Volkswagen's decision will impact not only agency workers but also people working on fixed-term employment contracts. At the same time, the firm will not be recruiting new workers.

This seems to be the first negative information coming from the Slovak plant of the German concern in a decade. In recent years, the plant has begun to manufacture three new models and the number of employees has risen by a few thousand.

Because of this, Volkswagen is immensely important for the Slovak economy. It makes up one percent of Slovakia's GDP with the car industry as a whole making up 13 percent.

Volkswagen organises job fair

Volkswagen itself organised a job fair in the Auto Forum building to help its dismissed workers find a new job. Ten different companies set up recruitment stands in the building just a few metres away from the main gate to Volkswagen.

Lukáš Uram, who assembles chassis for SUV vehicles, was looking for a job there. He went to Volkswagen through an agency three months ago.

"I learned that I would be laid off about three weeks ago," claimed Uram, who has been content with his job at Volkswagen. "I want to go through the offers gradually, but I would want to stay in Bratislava or its surroundings."

The companies which offered jobs in the Auto Forum building are mostly involved in the car industry. Hence, other car manufacturers, namely KIA, PSA Group and Jaguar Land Rover, as well as their suppliers such as Slovnaft and other companies like the Penam Bakery attended.

For instance, the Penam Bakery was looking for roughly 30 people, including drivers, expeditionists, electricians and locksmiths.

"We run permanently on a three-shift plan, and people from Volkswagen know what that is about," said Tünde Kaiserová, the bakery's personal manager. "Today, there are no trained bakers as they also work as machine operators."

Bad news from the start of 2019

Negative news from Volkswagen in Bratislava started coming early this year. At that time, the plant announced it would reduce the number of shifts. As of March, Volkswagen no longer produces SUVs over the weekend as the four-shift operation was reduced to three.

From June, the plant will also reduce shifts from two to one for the production of small vehicles, such as the Škoda Citigo and the Seat Mia.

Read also:Volkswagen will scrap 3,000 jobs by June Read more 

At the end of 2017, Volkswagen employed 13,700 people. The company also recruited more employees last year, increasing the figure to roughly 14,000 people. In addition to the 3,000 people to be laid off, the plant announced that it would return around 500 workers borrowed from Audi Hungaria. What is more Volkswagen also wants to lend its employees to other companies.

"We expect to deploy employees to Volkswagen's sister plants in the neighbouring countries," said Eric Reuting, member of the Board of Directors of Volkswagen Slovakia, in January.

Volkswagen has to pay more

These measures may be coming into force at this time because the plant has to pay more money to its employees. The average wage at Volkswagen is more than €1,800 and negotiations on a new collective agreement are presently being held.

Since last May, surcharges for night and weekend work have increased. The minimum wage has risen, too. It could reach €600 from next year, the Labour Ministry claims. Moreover, from 2019, the company has to pay a proportion of the new holiday vouchers.

Investment in e-cars through efficiency

In doing so, Volkswagen set a target to increase productivity by 30 percent by 2025 compared to 2018. The goal is to save costs.

The production of SUVs, which are the most important model to the Bratislava plant as it makes up the vast majority of production there, is, in particular, to be made more efficient. The concern has invested more than two billion euros in the Slovak car plant in recent years. The Bratislava plant will now help return this money to the parent company.

By 2023, the concern is to save about six billion euros thanks to similar measures across all its plants. The savings are then to be invested in e-mobility. Volkswagen has already announced that it will manufacture almost 70 new electric models instead of the planned 50.

The concern expects to produce 22 million electric vehicles in total by 2028.

Uncertain future

The Bratislava plant does not know what it will be producing when the cycle of current models, which lasts between five and seven years, is over. The production of small city vehicles in Bratislava will probably end in 2022.

Whether the Bratislava plant is to manufacture some of Volkswagen's electric vehicles is not certain at this point, either. It is currently thought that the vehicles are to be manufactured in only five plants in Europe, two of which are confirmed, namely the plants in Zwickau and Emden.

"This year's planning board will decide on further plans," said Andreas Tostmann, member of Volkswagen's production and logistics board, as quoted by the Trend weekly.

There are no concrete plans for the local Volkswagen plant, the management of the group claimed last autumn in Bratislava. The year 2019 will thus be crucial for the Bratislava plant.

"After the successful launch of the production of a new generation of premium SUVs, they must prove to the group through effective manufacturing that they are ready to take on the production of new models," said Martin Jesný, analyst of the Revue priemyslu magazine.

In fact, when the Volkswagen Group chooses where to place the production of new models, it looks at the success of each plant in different countries.

"Competition is really tough," added Jesný.

The later the Bratislava plant gets a new model, the worse it will be, not only for the plant itself but also for the Slovak economy. For example, layoffs could result.

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