The golden era of the Czech economy is nearing an end. Czech companies will economise next year – more than 70% of businesses will reduce their planned investments and will not extend production capacities. More than a quarter of companies will resort to job cuts, an exclusive survey the Economic Chamber carried out for HN has shown.
Stagnating wages will come hand in hand with the end of 13th monthly wages, with only 28% of businesses counting on paying these extra wages next year. Thirteen per cent of firms want to lower bonuses. “Companies have to economise. The strong crown has caused them harm, so they have to cut wage costs. They can do so by means of lay-offs or by not raising wages,” said David Marek of Patria Finance.
Firms to face tough fights with unions
Negotiations on wages for next year will be complicated. “We want a real wage growth of 3% to 4%. The situation in some companies is bad, but then there are sectors that are doing well. But collective bargaining in many companies has not started yet,” said Milan Štěch, chairman of the Czech-Moravian Confederation of Trade Unions (ČMKOS).
Collective bargaining is underway at Škoda Auto, where wages for the next two years are being discussed. “The negotiations have started,” said the company’s spokesman, but added he did not want to give more details. Wage talks at Škoda Auto usually take a very long time, and the last negotiations even resulted in a strike. Possible strikes would not have so much impact on the company this year because it has suspended production several times already due to a decline in orders, with another shutdown scheduled for the end of the year.
Collective bargaining at steelworks Arcelor Mittal was even interrupted. “It will continue next year. The standing collective agreement is in effect until the end of March,” spokeswoman Věra Breiová said.
Job cuts, planned by nearly a third of companies, according to the survey, pose another threat for unions and employees.
“We are trying to avoid lay-offs, but they may be inevitable,” said Kvido Štěpánek of Isolit Bravo.
“We are going to dismiss 425 people, but all employees who will leave by the end of the year will get a 14th wage thanks to the collective agreement currently in effect,” said Pavel Roman, spokesman for Bosch Diesel.
Slowdown to replace expansion
The time of foreign expansion plans is over as well. Businesses are going to reduce production and close down some of their branches. Five per cent of respondents in the survey said they would even close down whole operations due to the crisis.
Production shutdown is another “popular” measure. Lorry maker Avia, for instance, will halt production between the middle of December and the end of January. Its rival Tatra Kopřivnice will only operate for three weeks each month of the first quarter of 2009.
“Companies are reducing their investments and even abandoning projects that have been approved. It would be difficult to plan any expansion for next year,” said Jaroslav Hořínek, CFO at engineering company Fezko Strakonice.