Production goes East due to lower costs

Tomáš Fránek
27. 6. 2008 11:30
Some of foreign firms forced to sack people
Moving East?
Moving East? | Foto: Ondřej Besperát

Brno - Production slowly moving to less costly zones in Eastern Europe, high competition with cheap products from Asia and North America and strong Czech currency makes hundreds of motor work jobs disappear from the Czech Republic.

However, people that were sacked by largest foreign-owned firms have few reasons to be afraid of long-term unemployment.

There are hundreds of vacancies registered by regional employment offices. Practically all companies demand more labor.

CZK exchange rate

Recently, two major foreign investors to car parts industry announced they are sacking hundreds of employees.

US company Alcoa Fujikura Czech based in Stříbro, Tachov area left almost 850 from total of 2,050 employees unemployed.

The firm is going to relocate part of its production to Romania due to its less costly labor force.

The other reason is that the production in the Czech Republic has recently become inconvenient for the American investors due to unfavorable USD - CZK exchange rates.

French firm Faurecia in Tábor and Počátky fired 500 people.

The company is reducing its production in the Czech Republic because of harsh competition of Asian and North African production.

In its release, Faurecia points out "strong low-cost competition on global level".

"That's why Faurecia Lecotex is not competitive anymore. So it was decided to end activities of these branches (in the Czech Republic)," explains the press release.

Global trend

About every tenth of former Faurecia employees have already found work, mostly in Southern Bohemia and Vysočina region. The situation of the unemployed in Stříbro might become similar, since local employment office is now offering as much as 800 jobs.
Experts believe that the trend of car industry production being relocated to more low-cost regions will continue.

"From the long-term point of view, the most significant trends in the automobile industry are currently continuing relocation of production farther East - to India, China and Russia - and investments in new markets," said British car industry expert Peter Cooke from KPMG consultancy company.

Other sectors of industrial production undergo similar trends - Germany´s mobile phone industry is a typical example. Nokia closed its branch in Bochum and was forced to return EUR 30 million it received as a subsidy from the German government.

Nokia relocated the branch to Romania.


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Zdroj: ČTK
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