Peter Mrnka

Positive developments at suppliers expected but also under threat

I am pleased that the fifth edition of our survey confirms the successful operation of automotive suppliers in the Slovak Republic. Their success in 2016 is visible in a number of aspects of their business. In addition to continuing growth in revenues, which is primarily driven by the volume of existing and new contracts, and improving economic results, this success is also based on the high utilization of production capacities and facilities, work productivity and, the quality of produced components. High production quality and on-time deliveries and occupational health and safety enables Slovak branches of international corporations to achieve above-average performance in comparison with other subsidiaries.

According to the majority of suppliers, developments will also be positive this year. The key factor is not only last year’s successful results but also the continuing localization of the purchase and the increasing production volume of automobile manufacturers in Central Europe. The production growth of suppliers is connected with the creation of additional job opportunities and the high rate of work productivity is likely to be maintained. 

The grown in the suppliers sector in Slovakia has, however, started to be reflected in a growing number of obstacles and hampers a solution, which can no longer be tackled by standard operative measures. The main challenge is a lack of staff – our survey confirms the alarming fact that nine out of ten suppliers have been facing this problem this year. As a result, suppliers have to deal with high demand for employees and close to zero immediate labour supply. This places, in the first place, enormous pressure on labour costs at almost all companies – their average level of wage costs (in addition to continuing pressure of the automobile manufacturer on costs and productivity) has become a strategic issue and will continue to be so. The suppliers facing a lack of employees, therefore, require greater labour market flexibility and openness to foreign employees. They are also struggling with the unsuitable training of school-leavers and their high salary expectations and poor work habits. Our survey indicates that a possible solution to the HR problem, which unfortunately shows an increasing trend, is rejection of other growth projects in the Slovak companies and/or even decisions at the level of multinational headquarters on locating current or future production outside of Slovakia.

Finally, our survey looks in detail at innovations and new technologies. Companies are increasingly focusing on weight reduction, new materials, and alternative drives, and particularly the last area is considered highly promising regarding the strategies of all European manufacturers to expand the share of models with alternative drives. For now, Slovak suppliers are mainly focusing on robotics, more extensive production digitalization, and in-depth data analyses as part of innovations and the emerging Industry 4.0 trend.

Peter Mrnka
Direktor, Automotive Specialist, PwC