(Rewrites with car sector outlook, adds comments, details)
By Martin Dokoupil
PRAGUE, Oct 10 (Reuters) - The Czech Republic's top
industry, car production, will shed jobs and suppliers are being
hit by the global economic crisis, but it will still grow this
year and some companies plan to increase production further.
Czech carmaker TPCA said on Friday it plans to boost
capacity by 20,000 to reach 340,000 cars next year despite a
downturn in auto markets, due to rising demand for its smaller,
more economic cars.
At the same time, the Car Industry Association halved its
estimate for overall 2008 car output growth and said up to 3,000
people would lose jobs, with suppliers the worst hit.
The move by TPCA, a 50-50 join venture between Japan's
Toyota Motor <7203.T> and France's PSA Peugeot Citroen
<PEUP.PA>, is in sharp contrast with European manufacturers that
have announced output and job cuts due to falling demand.
"The whole car industry is experiencing a slowdown. We are
raising capacity ... because the mini car segment is growing in
Europe," said Jiri Cerny, TPCA Vice-President for production.
The third biggest Czech exporter, TPCA has been gradually
increasing production of its budget Aygo, Peugeot 107 and
Citroen C1 models since starting production in 2005 and made
308,478 units last year.
The company, with sales of over 50 billion crowns ($2.78
billion) last year, now expects to reach capacity of 320,000
vehicles this year and produce more than that in 2009 with
upgraded lines seen starting at full speed in June.
On the bleaker side, Volkswagen AG's <VOWG.DE> Skoda Auto,
the top Czech firm by turnover, plans to halt its lines for a
week at the end of October due to a drop in demand.
Another Volkswagen factory, which makes top-end SUVs like
the Audi Q7 and Porsche Cayenne in neighbouring Slovakia, is
also considering a production cut.
GROWTH SLOWS, SUPPLIERS HIT
The Czech economy is highly dependent on the car industry,
which accounts for some 21 percent of overall exports and
employs about 130,000 people. It has been relatively insulated
from the global credit crunch but both the government and the
central bank have cut growth forecasts for 2009.
The Car Industry Association cut its forecast for 2008
output growth to 4 percent, from 8 percent, or to 969,017 cars.
"The situation is serious but not tragic," said Martin Jahn,
head of Volkswagen's Russian unit and the association. "It would
be naive to think that it would improve sooner than next year."
Output should still grow in 2009 especially due to South
Korean Hyundai Motor's <005380.KS> launch of a 300,000
car-a-year plant next month, he said.
The association, which has around 160 members, also said up
to 3,000 people would have to be laid off by the end of this
year, mainly among auto-part makers.
"Some car makers are cutting orders by up to 40 percent. Our
company will see an average decline of 12-15 percent in sales,"
said Pavel Juricek, CEO of Brano Group, which makes cockpit and
door systems for major brands such as Volvo.
Ford's <F.N> Volvo announced earlier this week a plan to
slash 6,000 jobs due to a gloomy outlook.
Capacity expansion at TPCA's plant in Kolin, 67 km (42
miles) east of Prague, would mean hiring 100 more people in
addition to the current more than 3,500 employees.
Although TPCA is not experiencing any problems from the
Czech financial sector, Juricek said banks have started to be
more cautious in providing credit for local businesses.
"It is not the same situation as in Britain. The banks here
are rather cautious, they pulled out a bit and are monitoring
the situation," said Juricek, who expects to slash 200 jobs in
the coming months from around 2,500.
