Spain’s SEAT Loses New CUV to Czech Republic’s Skoda

MADRID – Volkswagen delivers the news its Spanish subsidiary SEAT had been dreading to hear: Mass-market stablemate Skoda will produce a new CUV at one of its three plants in its Czech Republic home base.

VW chose the Kvasiny facility over SEAT’s lone factory at Martorell, near Barcelona, Reuters reported Friday, citing a statement from Skoda. The automaker did not name the new model, versions of which will be sold by both Skoda and SEAT.

The decision is a setback for SEAT CEO Juergen Stackmann, who had been trying to persuade VW to add a new vehicle to the subsidiary’s manufacturing portfolio.

Production of the new model at Martorell would have followed discontinuation of the Altea range, which is expected soon.

Francisco J. García, chairman of the SEAT board and a member of the VW management board, has said there will be no successor to the Altea, one of the oldest vehicles assembled in Martorell. Only about 30,000 of the multipurpose vehicles were sold in 2013.

Since taking over for James Muir as head of SEAT, Stackmann has been struggling to persuade VW to award the Spanish brand a new product. Discontinuation of the Altea, and failure to land the new CUV, leaves Martorell with assembly of Leon and Ibiza models, as well as the Audi Q3 for the VW luxury brand.

SEAT recently hired 450 workers for a third shift at Martorell to increase production of its flagship Leon range, which was enhanced at the recent Geneva auto show with a sporty new model, the Cupra.

But that is not enough. Stackmann knows SEAT cannot survive with only two production models.

Another goal Stackmann set upon arriving at SEAT was to return the brand to profitability. To achieve that target, aside from reducing costs, increasing sales is essential.

SEAT was the top-selling brand in Spain in 2011 and 2012 for the first time in 30 years, but fell back to second place in 2013. The automaker sold 355,000 vehicles last year, a 10.6% increase over 2012, but that figure was only 71% of its annual production capacity of 500,000 units.

While there will be a SEAT-badged version of the new CUV, building it locally might have given sales a boost and end a 10-year string of losses. Since 2005, the Spanish brand has lost more than €1.5 billion ($2.09 billion), although its 2013 shortfall dropped 2.9% year-over-year to €152 million ($211.7 million) on total revenues of €6.9 billion ($9.6 billion), a 6% increase.

In a bid to increase demand, SEAT in 2012 expanded into China, a misadventure marked by tariffs slapped on auto imports and difficulties in creating a stable distribution network. Moreover, as Stackmann himself acknowledges, at this point only luxury vehicles successfully can be exported to China, and SEAT does not have that type of product in its portfolio.

Although the CEO does not dismiss the idea of exporting SEAT models to some markets in North Africa and even Latin America, he knows the brand’s natural market still is Western Europe. Underscoring that point, shortly after the Geneva auto show began he opened an 80,730-sq.-ft. (7,500-sq.-m) mega-showroom in Berlin.

Landing the new CUV is as welcome news to Skoda as it is bad news for SEAT. The Czech brand, like its Spanish sibling, has seen sales fall during the European economic crisis and needs new models to achieve its production goals.

Days before the final decision on the new model, reports in the Czech financial press gave assurances VW would award Skoda production of the CUV to be sold under the Skoda and SEAT brands.

The reports indicated Stackmann already knew of VW’s decision. He has stated publicly on several occasions that, even without assembling it, offering the new CUV in the Spanish market would be a positive for SEAT.

That attitude of resignation incensed members of the SEAT works council, who say awards of new models are crucial to continuity at the Martorell plant.

Matias Camero, head of the works council, expressed his dismay to the media at the unveiling of VW’s T-ROC concept CUV at the Geneva show. With the Tiguan compact CUV already part of VW’s range, the council is concerned the T-ROC also may be built in the Czech Republic, presenting additional competition for the Skoda and SEAT variants.

SEAT soon will launch an updated version of the Ibiza, its best-selling model with 154,000 deliveries last year, in an effort to maintain sales levels. But the award of the new CUV to Skoda has reinforced the feeling in Spain that VW does not know what to do with SEAT.