Škoda cars used to be the leading brand of the socialist bloc. That wasn't really a reason for pride if you realize that the competitors were the likes of Trabant, Wartburg, Dacia, and similar stars. ;-)
As early as in 1990, one year after the Velvet Revolution, it was decided that Škoda the carmaker would be sold to the Volkswagen Group.
And this partnership has done miracles for the company. It has returned the brand - founded in 1895 as Laurin & Klement (which would become the largest car producer in Austria-Hungary, before it joined the Pilsen-based Škoda Holding brand in 1925) - where it once belonged.
Škoda sold 684,226 cars in 2009, more than in 2008. Unlike others, the number of sold units hasn't dropped.
Rationally speaking, VW should be happy to own properly functioning plants in the times that were not easy for the car industry. Already a year ago, Škoda Superb won the car of the year in whopping 8 European countries.
One month ago, AutoBild.DE in Germany compared five cars in Superb's category. Superb defeated VW Passat, Ford Mondeo, Honda Accord, and Toyota Avensis. Similar tests in India and elsewhere end up with similar results. It's generally agreed that Superb is more luxurious than Passat.
Again, it's better for VW to own Škoda, isn't it? Even if there is an "intra-VW-group competition", the group clearly loses less than it would lose if Škoda were a purely external competitor or if VW were only competing with Passat et al. against others.
But this kind of rational thinking doesn't quite work with some people. Martin Winterkorn, a boss of Volkswagen, was furious when he learned about the AutoBild.DE test. Why? Well, Škoda was bought with the intent to produce inexpensive models in the starting category. Now it's competing with VW Passat - and beating it.
The reasoning of Winterkorn is short-sighted. It's really preposterous to imagine that a country's industry would keep its "low status" indefinitely. It's been long 20 years since the fall of communism and since the merger of Škoda and Volkswagen. Twenty years is almost one half of the time in which socialism was decimating the Czechoslovak economy. You really shouldn't expect the consequences to stay forever. Those 42 years sucked but they were not an "irreversible, infinite hell".
After all, Volkswagen has always meant "people's car". It's unreasonable to assume that it should naturally be a brand that produces luxurious cars. The tradition of the Volkswagen brand simply doesn't say "luxury".
Škoda continues to have certain comparative advantages - lower salaries than in Germany - and the idea that the Czech brand should be making lower-quality products is a deep misunderstanding of the history and the reasons why the quality of Czech products ever dropped. I think that they should use them as much as they can.
And that's the memo.
Bonus: Czech economy
The Czech GDP in Q4 2009 was revised from a 0.6% quarter-on-quarter drop to a 0.7% rise - a pretty big change that just confirmed the previous expectations. No recession in Czechia. Q3 2009 saw a growth, too.
The current account surplus (and similarly trade surplus) of the Czech Republic in January 2010 was CZK 15.62 billion ($0.84 billion, about $80 per person, or 0.3% of the annual GDP). To compare, China's newest February 2010 trade surplus was just $7.6 billion which is less than $6 per person or less than 0.1% of the annual GDP. In my opinion, yuan is no longer undervalued.