strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: August 26, 2005

 
 

Skoda Leaps to Market

It had a bittersweet introduction. In November 1996, Ludvik Kalma was killed on a country road. He was test-driving an Octavia at twice the posted speed limit when he drilled into a truck stalled at a junction. The German weekly Der Spiegel speculated that Mr. Kalma might have been assassinated. It was still common to see such suspicions aired in the Czech Republic, where so many people with connections to the old regime had subsequently turned up as wealthy businesspeople. A Czech police investigation dismissed the murder claims. There was something singularly melancholy, all the same, about the chief executive of a car manufacturing company being the first person to die in the model that would assure his company’s fortunes.

Skoda’s Evolving Strategy
Mr. Kalma was succeeded by Vratislav Kulhanek, then the CEO of Bosch Czech Republic, the division of Bosch that made engines for Skoda. A onetime professional volleyball player, rally driver, marathon runner, and ice hockey fanatic, and a natural salesman throughout his career, he cut a flamboyant figure at Skoda. He was also the last Skoda CEO with a Communist pedigree; since the 1960s, he had been a salesman and financier for Czechoslovakian automotive suppliers. Having joined the Communist Party for, he says, “pragmatic reasons,” Mr. Kulhanek was kicked out with several hundred thousand others for opposing the 1968 Soviet invasion. Then, in the 1970s, because of his charm, he says, the Czech authorities allowed him to travel regularly to West Germany to conduct business. After the revolution, his name was found in the files of the national secret police (Statni Bezpecnost, or StB) as an informer. Mr. Kulhanek says it was placed there to smear him, a common practice of the StB. An investigation by Volkswagen failed to turn up anything that would prevent his succeeding Mr. Kalma.

Skoda was increasingly assertive on Mr. Kulhanek’s watch, in part because of the CEO’s rare ability to speak with equal persuasiveness to Volkswagen executives (in fluent German) and to Czech assembly-line workers (in his native Czech). Mr. Kulhanek oversaw the introduction of an award-winning replacement for the Felicia called the Fabia (1999) and of the new Octavia (2004), which won the Golden Steering Wheel award in Germany and was voted Most Beautiful Car in Italy. He fought VW for the right for Skoda to produce a limousine model called the Superb (2002). And he convinced VW to make Skoda the rally driving representative for all the VW brands. “It’s about visibility,” says Mr. Kulhanek. “Rally driving is expensive. But it’s worth it.”

For all of his success, it is hard to escape the feeling that there were sighs of relief in Wolfsburg when Mr. Kulhanek retired as Skoda’s CEO in 2004. (He still heads the national automotive and industry associations as well as serving as chairman of Skoda’s supervisory board.) The Superb had ruffled feathers in Germany. It was well received by the critics, but it too closely resembled the Passat, Volkswagen’s executive workhorse. Skoda began drawing customers from the Passat in Britain, for example, after a J.D. Power and Associates survey placed the Czech automaker second in customer satisfaction to Lexus, with Volkswagen nowhere in sight. Skoda’s success thus potentially endangered Passat-related jobs in Germany. That was unthinkable for Volkswagen, which, with its partial state ownership and powerful unions, has sometimes been accused of trading profit for job security.

“It’s not just a problem between Skoda and Volkswagen,” says Dave Leggett, managing editor of www.just-auto.com, an industry Web site. “How to maximize efficiencies while managing brands is a question for the whole industry. Ford doesn’t want buyers to know that its Jaguar X-type uses the same platform as the common Ford Mondeo.”

 
 
 
Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store

 

Resources

  1. Alfred D. Chandler Jr. and Bruce Mazlish, Leviathans: Multinational Corporations and the New Global History (Cambridge University Press, 2005): The global rise of multinational corporations, cowritten by Harvard’s eminent historian.
  2. Graeme Maxton and John Wormald, Time for a Model Change: Re-engineering the Global Automotive Industry (Cambridge University Press, 2004): A definitive overview of the changing global context.
  3. Dennis Pamlin, editor, Sustainability at the Speed of Light (World Wildlife Fund, 2002): Online book contains a powerful chapter on leapfrogging for environmental sustainability. Click here.
  4. Dave Randle, The True Story of Skoda (Sutton, 2002): Illustrated chronicle of Skoda’s history from its 1895 origins to the Octavia.
  5. Horacio Rozanski, Allen Baum, and Bradley Wolfsen, “Brand Zealots: Realizing the Full Value of Emotional Brand Loyalty,” s+b, Fourth Quarter 1999: How Volkswagen originally “leaped to market” with its Beetle. Click here.
  6. Skoda’s Web site: Includes financials, automotive history, sports sponsorship, and current models. Click here.
 
Close