Rapid Decline in Slovakia’s Auto Industry

Per capita, Slovakia has long been considered as the world’s largest automobile producer, with approximately 12% of the nation’s annual economic output generated from vehicle production. What used to be considered an industry with secure, well-paying jobs, with long-term employment prospects is now looking more like an economic wasteland of epic proportions. The downturn in this industry is indisputably devastating to the nation. Over 3,000 jobs have been terminated so far, creating a huge concern for the future of Slovakia’s largest provider of private sector employment.

Amongst the many factors affecting the abilities and profitability of this market is, more southeastern European companies are beginning to offer lower cost options for vehicle production. Additionally, the uptick in electric vehicles is drastically affecting the production needs for the auto industry as a whole. Finally, with increased trade tensions across the global markets, we can see that the auto industry is being squeezed from a variety of directions.

In Slovakia, over 300,000 people work in the auto industry either in the actual production facilities, or in the offices that support the industrial production workers. Unions have also had to change their focus and tactics. Traditionally, these unions worked hard to secure higher salaries for all of their employees. Nowadays, however, the focus has turned to the stability of the industry with an increased focus on creating an environment that avoids massive job loss. This is vital as the shut down of a production facility can drastically affect the entire municipality supported by such a workplace. The closure of a facility can leave behind a ghost town and economically and emotionally affect everyone who lives there, including those who do not have any family members working at the facility, as witnessed by the downturn in the Detroit metropolitan area, for example.

The Slovakian government is working diligently to create new opportunities in the industry so that a changing market does not wipe out the economy of the nation. Investments in research and development opportunities to create the need for their production facilities and workers, as well as creating opportunities to produce electric cars in addition to traditional models, are increasingly the focus of the government. The four main carmakers with production facilities in Slovakia are Volkswagen, PSA Group, Kia Motors and Jaguar Land Rover. However, these organizations may be less interested in having operations in Slovakia since the local minimum wage is scheduled to increase, in addition to an increase in the country’s labor restrictions. Overall, Slovakia is working towards providing a better quality of life for their employees, but this may mean that larger companies take their productions to other countries lower labor costs and restrictions. What’s good for the employee isn’t always what’s financially best for an organization.

While the industry understands global trade tariffs and the resulting pressures on European automakers, it is hard to predict the actual impact on the industry over the next few years. The increase in demand for electric vehicles also makes major change likely for the global automobile industry in the coming years. This makes it vitally important for both Slovakian government, as well as the organizations to keep up-to-date with these proposed changes and continue to work together in order to create a market designed to keep people employed in their country.

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