Skoda CEO Tells Employees Not To Worry About Potential Move Downmarket

Last month, reports from Germany suggested that the Volkswagen Group plans to reduce overlap between brands, particularly between VW, Seat and Skoda.

More specifically, VW Group CEO Herbert Diess aims to boost the VW core brand by reducing internal competition with Seat and Skoda. A way to accomplish that would be to push the Spanish marque upmarket, strengthen the VW brand, and have the Czech brand focus on entry-level cars priced between €10,000 and €20,000 ($11,180 – $22,360).

The reports were not received well in the Czech Republic and adverse reactions from within the company forced Skoda CEO Bernhard Maier to send an internal letter to employees. In the document seen by Autonews Europe, Maier wrote that Skoda’s brand values of space, functionality, value for money and forward-looking design “will not change in the future.”

Also read: Do Not Move Skoda Superb Production To Germany, Unions Warn VW

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In an attempt to play down worries about a big change at the brand, the Skoda CEO said that reviewing brand positioning “is one of the core tasks for the strategy department of a multi-brand corporation” and a “normal process.” He added that the VW Group’s decision to build a new plant for the next-generation Skoda Superb and VW Passat midsize cars shows that the German company has confidence in the Czech brand.

Skoda has had tremendous success in recent years, achieving consistently higher profit margins than the VW brand. That’s mostly due to the fact that Skoda’s labor costs are much lower as most of the production is concentrated in the Czech Republic. Furthermore, Skoda uses VW technology and does not need to invest in innovation.

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This has brought Skoda powerful enemies in the VW Group, including the carmaker’s labor leader and supervisory board member, Bernd Osterloh. He demanded in the past that VW denies Skoda access to its latest technology and opposed the VW Group’s initial decision to give the Czech brand the operational lead on the proposed new plant in eastern Europe or Turkey.

In the end, the German carmaker changed its mind and the facility will now be a VW factory, building VW, Skoda and possibly Seat models. Regardless of VW’s plans for its Czech division, Skoda continues to fire on all cylinders. Fueled by strong demand for its three SUVs (Kodiaq, Karoq, and Kamiq), the brand sold 559,900 vehicles worldwide in the first half of 2019, up 9.6 percent year-over-year.