Book Review (Pavlinek 2008)

A Successful Transformation? Restructuring of the Czech Automobile Industry

A Successful Transformation? Restructuring of the Czech Automobile Industry

Petr Pavlínek

Physica: Heidelberg (2008), 295 pages, Hardcover, 89,95 €, ISBN: 978-3-7908-2039-3

Reviewed by Christian Weis, IG Metall – Headquarters, Department for Company Policy and Co- determination, Frankfurt/Main, Germany. Email:

(16 October 2009)

What is a successful transformation of a former socialist industry to the capitalist mode of production? This ambitious question is asked by Petr Pavlínek, professor at the Geography department of the University of Nebraska. Pavlínek has been extensively involved in debates, first, on foreign direct investments in central and eastern Europe, and second, in the transformation of the automotive industry (in “Czechia”) in particular. He brings these two debates together in this new monograph.1

He gives not only an excellent summary of the post-socialist development of Škoda Auto (chapter 3), but covers as well the pre-war, socialist and post-socialist production of other passenger car and commercial vehicle makers (such as the legendary Tatra company), as well as the automotive supply industries. With this account, Pavlínek probably presents the first comprehensive research work on this key industry in Czechia.

The book focuses on the period before and after the fall of socialism in central and eastern Europe, and thus conceives the development of the Czech automotive industry as a path-dependent process, embedded in a framework of space-time conditions and their political and economic specificities. This becomes apparent in the first two chapters which situate the Czech automotive industry in territorial and historical contexts.

For years geographic research on the transformation from socialist to capitalist production has emphasised the difficulties which occur when profit-seeking capitalist modes of production clash with the inefficiencies of the planned state economy. In contrast, input/output geographers and mainstream economists have tended to see the transformation of the state economy in central and eastern Europe after 1989 as a “transition” from inefficiency to efficiency with combined managerial and modernisation problems. In contrast to these continuous neo-liberal approaches, institutional and evolutionary accounts in economic geography focus on the notion that “zero hour” does not exist after political-economic changes. Instead, processes of transformations must be seen in path-dependent contexts of space-time, framed by formal and informal institutions which continue to exist. Moreover, while for mainstream researchers the outcome of economic transition is capitalism, “non-conformist” geographers have identified new modes and hybrid types of economic relations (“bricolage”), which are not exactly the same as the which can be observed in mature capitalist economies.

The influence of the relational approach in economic geography can also be felt in Pavlínek’s work, although the conceptual framework of his work is not explicitly contextualised. This means as well that the monograph has a largely descriptive character, based on secondary data and interviews. Nevertheless, this shortcoming is balanced by an extremely rich and comprehensive set of original data on issues around inter alia markets and trade links, domestic privatisation (chapter 5) vs. foreign direct investments (chapter 6), and restructuring strategies (chapter 7). His main hypothesis is one of the neo-liberal dogmas, that is to say successful transformation is based on private ownership: on particular, the chapter on the privatisation of the Czech components industry (chapter 5), which is diversified and characterised by many different small and medium-sized players, shows that there is no such research evidence on this assumption, as (quick) privatisation (in its various forms) does not guarantee success.

The question of whether the Czech automotive industry was successfully transformed from state ownership to private ownership is answered by the author with a rather quantitative assessment. The transformation of passenger car production (Škoda Auto) can be clearly evaluated as very successful, as production quadrupled resulting in more than 50% additional jobs (1994-2005), while the supply industry increased its output even more dramatically – linked with a tripling of growth of employment, mainly in foreign owned firms. Success can also be measured in the globally competitive quality standards and exports figures of this industry. The downsides of the transformation process are the collapse of the commercial vehicle producers and thus a loss in employment, with exception of the bus producer Karosa, which was taken over by Renault. Indeed, the motor vehicle industry (passenger cars and commercial vehicles) employs today less people than in the first half of the 1990s, despite the growth of Škoda. Pavlínek also emphasises the risks of these developments, in particular the vulnerability of this industry given its high concentration in Czechia. Moreover, the Czech automotive industry is highly dependent on decision-making processes and investments from abroad. Indeed, the disadvantageous focus on low value-added products in the supply industry, for example, is already prone to relocation.

It might not be surprising that the reviewer (a full-time trade union officer in the field of European industrial relations in the automotive industry) criticizes the (almost) complete nonexistence of the role of trade unions and workers’ representatives in Pavlínek’s account on the transformation of the Czech automotive industry. In particular Volkswagen’s gradual acquisition of Škoda Auto and its successful restructuring was also realised through transnational co-operation between the responsible unions and workers’ representatives in both countries to this day. Although many academic observers perceive unions and workers’ representatives as rather weak players (not only in central and eastern Europe), growing wages, improvements in working conditions and health and safety as well as the institutionalised social dialogue between employers’ and employees’ representatives at Škoda Auto are doubtless important elements of the probably most successful transformation of all companies in the former socialist world.

Nevertheless, workers’ interests are constantly under pressure in this industry, not only in times of crisis, and also in those countries which are labelled as low-cost countries or perceived as a threat for jobs in western Member States of the EU. Further research should integrate the transnational relationships between the democratically elected workers’ representatives and unions and has to acknowledge them as major stakeholders of transformation processes, what would help them to improve their strategies how to secure employment and transnational solidarity.

Due to the comprehensiveness and rich set of original data (exception: industrial relations), Pavlínek’s monograph can be recommended in particular to early career researchers and faculty involved in post- socialist transformation debates and/or the economic geography of the European key industries. Taking into account that this is probably the first full account on the automotive industry in Czechia, the book is good value for money.

Christian Weis, October 2009

1 Apparently, the Czech Republic is the only country in the world where the official country name is formed with an adjective. In order to harmonise this “indefensible” linguistic situation in the English language, Pavlínek proposes to use “Czechia” instead.

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