Skoda Under Communism

The Slovaks got a classic Faustian bargain. At the urging of the Warsaw Pact, the important Czechoslovak armaments industry was transferred from the vicinity of the border with the West to secure central and eastern Slovakia. The great Skoda arms factories in Plzen switched over entirely to cars, machinery, and railroad equipment. Things were humming during the Cold War, but when it ended, the markets disappeared.

The products of the Czechoslovakian Skoda arms works played a major part in the international flow of munitions. With funds from the urgently mobilized American Jewish community, Israel was able to purchase large amounts of first-rate military equipment from communist Czechoslovakia's Skoda Arms Works. Arbenz compounded his threat to US economic interests by secretly purchasing 2000 tons of arms from the Skoda arms firm of communist Czechoslovakia.

In 1945 the concern was nationalised. Individual departments of Škoda works were gradually separated from the parent company including the car factory in Mladá Boleslav, aircraft factory in Prague, works in Slovakia and other factories producing food processing equipment. Severely damaged in World War II, the Pilsen factories were rebuilt and restored to production, renamed the V.I. Lenin Works. Best known for munitions, the Skoda Works also manufactured heavy machinery of various types, military aircraft, railway locomotives, and cars. Skoda pioneered the development of electric-railway locomotives, with plastic body panels to reduce axle loadings.

Skoda Works was gradually split up into different sections (e.g. the car works in Mladá Boleslav, the aircraft plant in Prague, arms factories in Slovakia, and other plants producing food-industry equipment). An idea of the extent of the Czechoslovak arms industry is given by the ramification or decentralisation of the Skoda Works, which possessed groups of works in Pilsen, Prague, Konigsgratz, Hradek, Komorn, Jungbunzlau and Brno. The company's main task now was to produce equipment for heavy engineering, capital construction in the industrial sector, public transportation, and power engineering. Most exports were headed towards the Eastern Bloc.

Skoda, once the leader in the former Czechoslovakia's armaments production (60 percent of the production), retired from this sector completely in the 1960's. By the 1960s Skoda was largely engaged in civil, not military, activities. Based on the traditional production processes and past success, the Czechoslovak economy managed to maintain a relatively good standard in the post/socialist period for several decades, in spite of the changes brought about by planned economy and efforts at unduly rapid growth. This standard only became questionable towards the end of the nineteen sixties due to development of new technology in the western world. The permanent stagnation of the economy started after the seventies, also affecting the Mladá Boleslav automobile manufacturer in spite of the company's leading position in the East Europe marker. Production grew again only when the model range Skoda Favorit went into production in 1987.

Production of machinery for heavy engineering, industrial capital construction, mass transport and power engineering became the main production program at Pilsen. Export was directed largely to the countries of the former socialist block. With the division of the country at the beginning of 1993, the Czech Republic lost all access to the manufacture of heavy weapons.

The conversion of Slovak arms manufacturing enterprises came like a bolt from the blue. It was more a political than a rational gesture. The previous government was stuck between two stones: It was limited by the proclaimed decision of federal bodies to phase out the production of heavy weaponry and, on the other hand, by the social and economic pressure against the conversion of the armaments industry.

Following the change in political climate in 1989, SKODA started along the path of privatization, and used this time to come up with an optimal production program, make new business contacts, and look for markets other than those that had so far been its priority (and only) markets, i.e. the Comecon countries and the Soviet Union, which collapsed after 1989.

After 1989 a transformation period began for the ŠKODA concern to transform it from a state enterprise into a joint-stock company and to find not only the optimum production program, but also to expand business contacts and find other markets than the preferred countries of the Council for Mutual Economic Assistance which collapsed after 1989. ŠKODA Transformation started diversification of its production program from the key industry of production of railway vehicles to include the sphere of public urban transport. Since the end of the 1990s there has been extensive modernisation of subway train units and increasising production of modern low-floor trams.

While some companies may have chosen to form foreign alliances, in some areas Czechoslovak industry was strong enough to succeed without foreign investment. The electronics sector, in particular, was in a good condition. In the mid-1980s the Czech electronics industry was the world's seventh largest producer of military electronic devices. The skills underlying this strength survived. The smaller Czech munitions and weapons manufacturers were also experiencing better times by the late 1990s.