SKODA RIDES VW'S PRESTIGE AUTOMAKER TURNS U.K. LEMONS INTO LEMONADE

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The British automotive market has been anything but an easy ride for Skoda. The Czech auto maker's history here is one of bungled product introductions, car shortages and poor workmanship.

But now, as a result of Volkswagen's ever-increasing involvement, Skoda may finally have its act together in the company's second largest export market after Germany.

After two decades, Skoda has 0.65% of the car market here. Yet, so far through Aug. 10 of this year, British subsidiary Skoda Automobile (U.K.) has sold 8,343 cars, almost as many as the 8,620 it sold in all of last year. Skoda competes directly against the Ford Escort and Vauxhall Astra.

Dermot Kelly, Skoda U.K. managing director, expects to sell 14,000 cars this year. That would still make the company relatively small potatoes to Volkswagen, which anticipates sales of about 100,000 VW and Audi cars here, but it would be a significant achievement for Skoda U.K.

The last time sales came close to that figure was in 1989 when 13,606 were bought by thrifty Britons, snapping up remaining stocks of the super-cheap Estelle model that started at $5,390. But U.K. sales plunged 23% the following year after the introduction of the more expensive Favorit, and stayed near the 9,000-car mark ever since.

"The car historically has always had a reputation as being of poor quality and unreliable," Mr. Kelly said.

As a result, in 1989 the company removed the Skoda nameplate and kept it off until 1993, when the Favorit was improved by Volkswagen, which acquired 31% of the Czech parent in 1990.

Mr. Kelly said he hopes to sell 40,000 cars annually by 1999-giving Skoda a 2% share.

Despite the product upgrades, in 1992 it had become clear to managers at Skoda U.K., its ad agency GGK London and its marketing consultancy Quadrangle Consulting Ltd. that the British market was different.

Although Skoda had a higher brand awareness in Britain than anywhere else in Western Europe, opinion was overwhelmingly negative.

"There are about 100,000 Skoda owners in Britain-much higher than in Spain, France or Italy," said Steven Green, GGK account director. "And with all the jokes going around, we had a unique combination of factors in the U.K. In most other European countries the problem was that Skoda had a complete lack of awareness, so all they had to do was say, `We are here."'

The result was a British campaign that stressed Volkswagen's involvement in Skoda U.K. Meanwhile, in continental Europe, Czech Skoda used a separate, pan-European campaign, also done by GGK, Prague, based on the "IQ (mind) + (heart symbol) = Skoda" motif, which bombed when it was tested in Britain.

"[People] were saying, `You are telling me that I should love Skoda when I think it is crap,"' said Simon Lidington, partner at Quadrangle. "So we told Skoda to use Volkswagen to create a momentum of change."

The idea of using VW in Skoda ads in Britain was initially opposed by Czech Skoda, because some managers believed Skoda's bad reputation could damage VW's stature. But Skoda U.K. managers prevailed, and they initiated a $4.5 million print campaign in 1993 that tried to create confidence in Skoda by waving the Volkswagen flag with headlines such as "Volkswagen [was] so impressed they bought the company."

This year, the heavy ammunition was unloaded, an $8.7 million barrage of U.K. TV, print and direct mail. About $6.9 million is being spent on TV to tell a story of Czechs who were initially unsure if they could meet the stringent German standards of VW-but did.

Skoda has budgeted $12 million for a U.K. print and TV campaign next year. The Favorit is being replaced by a new model.

One problem that may be difficult to solve is how to develop a personality for Skoda that is distinct from VW. As Mr. Kelly said, "The name Skoda still has negative brand values in terms of unreliability."

Where to take the brand in the U.K. from here-or even who will-isn't clear. GGK lost the designation of "worldwide creative agency" to Grey Advertising in June, although GGK London continues to hang on to Skoda U.K. But Grey is also working on the ads for the new car. Frank Farsky, Skoda's director of marketing, said one of the two agencies will be chosen soon. Carat is expected to pick up media buying in the markets it doesn't handle.

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