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Mladá Boleslav pledges relief to Škoda Auto

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One of the wealthiest Czech towns is to take an unusual step due to Škoda Auto’s problems.

The Mladá Boleslav Mayor Raduan Nwelati (ODS) wants to earmark millions from the town coffers and relieve people of those taxes over which the town has influence, namely property taxes and municipal fees.

Next week he is also planning to offer “significant help” to Škoda Auto’s head Reinhard Jung.

“We want to offer help to Škoda Auto. We want to help them improve their cash-flow, and namely significantly,” Nwelati told HN. What exactly the carmaker, which employs most of the town’s inhabitants, could receive, is to be discussed with the company’s top management.

More than 20,000 people in Mladá Boleslav and six times that many people in the entire country work for the company. Last week, Škoda announced that due to a sharp decline in demand most of its workers will go to work only for four days a week till at least June.

A similar cut in production was recorded in Boleslav in 1990 for the last time, when Václav Havel granted the company an amnesty. Two thousand prisoners worked with the carmaker at that time and most of them left.

For the first time since Volkswagen merged with the company, Škoda will cut its year-on-year production next year, which is going to have an impact on the whole Czech economy due to the size of the factory and the big number of its suppliers. It is possible that the trade surplus thanks to which the Czech Republic experienced a record growth in the past years, will be balanced out.

“Due to Škoda and the new data on industry we had to re-evaluate our estimates of the foreign trade,” says Patria Finance’s analyst David Marek. Instead of a surplus of 30 to 35 billion he expects only 10 billion next year and adds that the result may be even worse. This year a surplus of about 90 billion is expected.

If the slowdown is so big that the Czech Republic will go into recession, Topolánek’s cabinet is planning to lower corporate taxes and other payments. Also the ČSSD has presented its plan to raise unemployment allowances, among other things.

Lorry maker Tatra is also experiencing problems. Russia, which is together with India Tatra’s main customer, is raising its customs duty from 10% to 25% as of January. According to Tatra’s managing director Jiří Polman, the time has come for state intervention. “Police can buy more Škodas and earlier, the army can buy Tatras. We need business, we have to get to our customers,” Polman says.

On the other hand, the Kolín-based TPCA is still planning to increase its production by 20,000 cars next year. Also the new Hyundai carmaker in Nošovice is raising its production and number of employees. The company’s heads still believe they will be able to produce 185,000 cars next year.

The car industry all over the world is becoming the next sector after banks which has been affected most by the global crisis. In the US there have been serious talks about the possible bankruptcy of one of the three biggest carmakers. The state is planning to help, like in Sweden, France and Germany.

Translated with permission by the Prague Daily Monitor.

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