Grinding it Out – The Czechs Move Forward

Metalwork in the Czech region is an old story – local examples of the craft date back to 400 BC, and include artistic, military, and eventually, industrial applications. Today, according to the Czech Ministry of Industry and Trade, over half the country’s exports involve some kind of metalwork, typically machinery or transport equipment such as automobiles, locomotives, and public transit vehicles. The October 2005 Canadian Journalists’ Mission reflected this with visits to major tool manufacturer Tos Kurim, rolling stock manufacturer Skoda Transportation, hydraulic component manufacturer Hydraulika, and finally, the International Engineering Fair in Brno.

This is a critical time for the Czech Republic. Following its admission in 2004 to the European Union, along with Poland, Slovakia, and Hungary, the timetable has accelerated for convergence – that is – ratcheting up its economy to bring it on par with the rest of the EU. The Czech Republic has led its counterparts in exports, employment and per-capita GDP, but there is much work to be done. Plans to adopt the Euro in 2010 are keeping the pressure on, and Czech officials are counting on the country’s industrial strength to play a key role.

One company in the spotlight is Skoda Transportation, who are actively seeking to expand their reach into North America. They are paying special attention to our own Toronto Transit Commission, whose 30-year old streetcar fleet is approaching end of life. The Commission is planning to purchase 96 new vehicles, in addition to renovating a number of cars in the existing fleet.

Toronto has some interesting challenges. Its track system has a large number of sharp turns and hills, making an “off the shelf” streetcar unlikely to fill the bill. However, on a visit last summer to Portland, Oregon, the TTC inspected streetcars manufactured by Skoda, which according to officials came the closest so far to meeting all of the requirements.

The ability to customize products to meet specific needs is a key marketing point for Skoda. According to sales manager Petr Vizdal, one key advantage is that they control all aspects of the manufacturing under one roof. In their sprawling factory in Pilzn, we saw a wide variety of activities –body shell production, the machining of all parts of bogies, the manufacture of traction motors,and control systems, and the assembly and testing of whole vehicles. (The author test-drove a streetcar without incident.)

Metalwork, however, is not just about big ticket items. Within the EU, the industry has survived largely by providing metal parts for other manufacturers. One example we saw was Hydraulika, a plant that machines hydraulic components for systems made by Siemens and others. In general, the Czechs are said to be best at the aspects of metalwork that are close to the workpiece – machining, casting, and assembly. Their work typically complements the work of German and Italian companies who design electronic control systems and hydraulic systems.

One of the big advantages businesses have in the Czech Republic is low labour costs – the average wage is about $1000 CDN per month (in industry, the figure is about 1200 CDN). According to Skoda’s Vizdal, this is one of components that gives the company a 10 – 25% price advantage over competitors in the EU. Another result is that plants haven’t been under intense pressure to automate, as are there North American counterparts. We saw a lot of manual work in the plants we visited.

But the Czech Republic is no backwater when it comes to technical sophistication. Highly specialized technical universities have a long tradition here, and standards are among the highest in Europe. Skoda draws heavily on graduates from specialized engineering faculties with departments dedicated to transport means and infrastructure, such as Technical Universities in Prague and Pardubice. In total, there are approximately 3500 engineering students enrolled in specialized transport programmes in the Czech Republic.

Prior to 1989, when all factories were state-owned, integration between university and factory was very close. Paul Svoboda, Sales Director in Canada for Havlik Machinery, the Canadian distributor for Tos Kurim, remembers the days when he was in school. He received a master of mechanical engineering at the technical university in Brno, with a specialization in metalwork. Two years before he graduated, he was already designing tools for Tos Kurim, his eventual employer.

Although reduced in size, the strong technical education system still exists. Technically-minded students have three choices. Many, like Svoboda, chose academic high schools, or gymnasia. Graduates from these programmes go directly into a Master of Engineering Programme. Students can also chose to go to a technical high school, from which graduates can go to a Bachelor of Engineering programme, and progress to a Masters if they chose.

The third category is high schools with vocational programs. These provide practical training that is tightly integrated with industry. Students will get lots of practical on-the-job training. After three years, a student will be trained to operate a milling machine, or to run an assembly operation.

According to Svoboda, there are no magic bullets when it comes to education. Svoboda thinks that what Canada really needs is a broader commitment to education to provide what “kids get in European schools.” “This is a ground,” says Svoboda, “because when you start to work, you have to educate yourself all the time. And then you have to really specialize in order to do the job. But you have to start with a good general education.”

The region is not without its problems. Accustomed to working for a totalitarian state, many workers maintain a resistive attitude. E.W. Latal, the owner of Hydraulika, has found that productivity is an issue. Latal has also found that mobility is an issue, which that recruitment for tradespeople has essentially be limited to the immediate neighborhood. “People don’t move,” he says.

Skoda’s Vizdal sees challenges for breaking into new markets. “We don’t have much experience in Canadian markets. It will be hard for us because every country has its own system of tender procedure, etc. But generally speaking, I think we are able to compete in every country with big players and the situation is quite simple; if there will be open international tender, and no political pressure, for support of local producer, we can compete.”

When it comes to sizing up situations in other parts of the world, the Czechs are pretty agile, according to Svoboda. “The children in the Czech Republic are forced to learn more about the world. You have to learn more about your neighbors. Learn more about what is around you, because you have to fight for your existence. There is just a small state with a few people who are speaking Czech.”

But Czechs are very emphatic that they are part of the European mainstream, and not an out-of-the-way Eastern European nation. In fact, we were inundated with literature pointing out that Prague is actually west of cities like Vienna, and very close to the geographic center of Europe. The correct term for the region, according to the Czechs, is Central Europe.