35 years ago — in April 1991, an agreement was signed between the Czech automaker Skoda and the German concern Volkswagen. Formally, it was a merger, but taking into account the scale and capabilities of the parties, it would be more correct to speak of an acquisition: a large West German auto giant integrated a relatively small brand from the former socialist bloc into its structure.
This event turned out to be important not only for Skoda itself. It actually launched a wave of mergers and acquisitions in Eastern European countries, which later affected Russia. As a result, the automotive industry of the entire post-socialist space has undergone serious changes.
Background: the crisis of the industry by the end of the 1980s
By the end of the 80s, the automotive industry of the Eastern Bloc countries faced a number of systemic problems. The gap with Western European manufacturers was becoming more and more noticeable, especially in technological terms. Model lines were updated slowly, and the quality of the equipment produced was often inferior to foreign counterparts.
The situation was characterized by several features at once:
- technological gap from Western European manufacturers
- outdated designs and rare model updates
- reduced competitiveness and product quality
Czechoslovakia against this background looked like a relatively strong industrial power within the socialist camp. The country's automotive industry included several well-known brands: Tatra all-wheel drive trucks, LIAZ and Praha tractors, Avia commercial vehicles, and Karosa buses. These products were in demand not only within the country, but also abroad, and in some parameters were ahead of analogues from other Eastern Bloc countries.
Nevertheless, in the segment of mass passenger cars, the key role was played by the enterprise from Mlada Boleslav, which produced cars under the Skoda brand. For a long time, the design feature of these cars remained the rear engine and rear-wheel drive — a scheme that persisted almost until the end of the 1980s.
Only in 1987, the front-wheel drive Skoda Favorit was put on the conveyor. In this sense, the situation resembled the situation of the Soviet automotive industry: around the same years, AvtoVAZ began producing front-wheel drive models VAZ-2108 and VAZ-2109, also with a noticeable delay relative to leading world manufacturers.
Reforms and the search for an investor
Political changes accelerated the transformation of the industry. In 1989, the "Velvet Revolution" took place in Czechoslovakia, as a result of which the communist leadership was removed from power. The new government embarked on a course of reforms, including large-scale transformations in the economy.
In the automotive industry, the path of privatization was chosen. State ownership, as experience has shown, did not provide sufficient management efficiency of enterprises. In these conditions, they began to look for a strategic partner for Skoda.
The selection process turned out to be multi-stage and quite tough:
- in June 1990, the search for an investor was officially announced
- 24 applications were submitted from interested companies
- after preliminary selection, 8 applicants remained
- the final stage reduced the list to 4 candidates
As a result, two participants fought for a 30 percent stake: the Renault/Volvo alliance and the German concern Volkswagen Group. Volkswagen won, and on April 16, 1991, Skoda officially became part of it.
The amount of the transaction amounted to 620 million German marks. At the same time, the German side assumed a number of obligations, including the preservation of the Skoda brand. It became the fourth brand of the concern, along with Volkswagen, Audi and SEAT.
Further development of relations led to the fact that in 2000 Volkswagen Group became the sole owner of Skoda Auto. Over the past decades, a large-scale modernization of production, model range and technologies has been carried out. As a result, the Czech brand has come a long way from a local manufacturer to a global auto concern with millions of units produced.
The significance of the 1991 transaction goes far beyond one company. It became the starting point for large-scale changes in the automotive industry of the region. Following Volkswagen, other major players began to come to Eastern European countries: the Italian FIAT gained a foothold in Poland, and the French Renault in Romania. At the same time, the construction of new assembly plants was unfolding.
It was this process that opened a new stage of development for the automotive industry of post-socialist countries, associated with integration into the global industry and attracting foreign investment.