For the largest employer in Germany and the 8th largest in the world. For the manufacturer of half of all cars produced in the country. In other words, VW sneezes and Germany, if not all of Europe, rallies.
Last Monday’s mantatas came to complete the already “crooked” vine inside Germany. The management of Volkswagen has announced that the mild consolidation measures it is implementing are not enough and put two – former – taboos on the table: the closing of a plant or plants and job cuts. Is it the time of decline for German industry? Is the superpower collapsing? Is a domino of developments coming for other industries as well? Is Germany dying as a place of competitive industrial production? Is VW, after all, Germany in miniature?
Will Volkswagen go bankrupt?
To make the picture clearer, the Volkswagen Group, which includes the company of the same name, Audi, SEAT, Skoda, Lamborghini, Bentley, Bugatti and Scania, among others, is the largest car manufacturer in the world, with 136 factories and 670,000 employees, of which 300,000 in Germany. It manufactures over 26,600 vehicles daily.
Volkswagen is not in danger of going bankrupt anytime soon. On the one hand, because its shareholder is always the state of Lower Saxony. On the other hand, because in 2023 the Group reported a net profit of 17.9 billion euros, registering an increase of 2.1 billion from 2022. But it is in serious danger of losing the “train” of the transition to electrification and with it its position in international competition, under pressure from China, its biggest rival. VW CFO Arno ‘Adlitz tried to explain the situation, referring to the company’s “excess production capacity”. Two million fewer cars are sold annually in Europe today than before the coronavirus pandemic. “This is unlikely to change,” he stressed, adding that for VW, which owns ¼ of the European market, it means “we are missing the sales of 500,000 cars a year corresponding to two factories” – that is, around 15,000 to 20,000 workers. As he said, “this is not about our products or poor sales performance, it’s just that the market isn’t there anymore.”
The problem is of course more complex: in Germany, energy and payroll costs are particularly high. At the same time, sales of electric cars are far less than expected. The German government also had a hand in this, canceling at the end of last year the relevant subsidy for the purchase of a new electric car. Indicatively, 69% fewer electric cars were registered this August than in August 2023.
At the same time in China they don’t sleep. Their electric cars may still have a moderate reception in the European market that will hardly trust them, but their appeal in the interior is enough and more. Just as in previous years VW’s profits in China have reached and exceeded in order to maintain the very expensive production lines inside Germany. This era seems to be coming to an end now. Sales of German automakers in China aren’t just falling — they’re collapsing. This is partly because the Germans, once pioneers of the industry, are now developing too slowly and their models are for the Chinese outdated – and too expensive. Recently, the head of the “Alliance Zara Wagenknecht” declared with pride, but without much understanding what she was saying, that “Germany makes the best internal combustion engines”. He was right, but he probably didn’t realize that that was exactly where the problem was.
Wanted new and electric “Skaraveos”
VW’s aim, passenger car chief Thomas Schaefer said last week, is to save resources, which it will channel into producing a supermodel “the likes of which customers and competitors have never seen before”. A model that will ensure the viability of the company for many years to come. But this model was supposed to be the ID.3, which its creators aspired to replace even their best seller, the Golf. In retrospect, that generation of electric vehicles is now considered to have been released prematurely, not ready, under the pressure of the “dieselgate” scandal, the revelation that the company had been deceiving its customers about the actual emissions of its cars. The problems are therefore recorded and the employees were perhaps the only ones who were not surprised by the developments.
In the company, a restructuring plan is already underway with a horizon of 2026, which has been implemented until now with the consent of the employees. What has changed is the realization that on the one hand soft measures are not enough to close a 5 billion euro hole and on the other hand that Chinese production, with the – more or less legitimate – support of the state, can no longer be dealt with by the old means. And the success of VW’s electric cars in the Chinese market, where the German company operates 39 factories under the slogan “In China for China”, is crucial.
The stakes are high for the iconic 87-year-old company, which employs around 120,000 people in Germany and is just as critical to workers and the rest of Germany’s economy. “If VW is in crisis, the country is in crisis too,” said Daniela Cavalo, head of the Group’s workers’ committee. In addition to the directly dependent employees, there are thousands of companies connected in one way or another to VW, e.g. as suppliers. “For the German economy, VW is more important than all foreign trade with Greece,” ING Bank chief economist Carsten Brzeski told BILD.
VW ensures the well-being of entire regions. For example, the factory in Zwickau, Saxony, which is the first candidate to close, employs 10,000 workers, in a town of 90,000 inhabitants. In Kassel, with a population of 200,000, the VW factory employs 15,000 people. In addition, because the company pays its employees well, the standard of living generally rises in the areas of its facilities. “Every second, a family is connected to the VW plant in some way, even if it is the family of the local butcher,” the IG Metall union official at the Zwickau facility emphatically states. But the competition is relentless: Toyota outsells VW, but employs only about half the number of workers. The business model of the German Group, with the participation of the public and employees in its management, is evolving from a management model to a burden on profitability. Excess production should, say industry analysts, be expected when so many production lines are operating. “VW has prepared for an increase in sales and has expanded its production capacities for this, but the market is now reluctant,” explains the head of the committee of “wise men” of the German economy Monika Schnitzer.
Volkswagen and the AfD
The German government, for its part, is concerned, but it is not certain that it can do much. The “green” Minister of Economy, Robert Habeck, sternly called on the company’s management “to take responsibility”. But he was the one who accepted the removal of the subsidy measure for the purchase of an electric car, under pressure from the liberal finance minister Christian Lindner. ING Bank’s Carsten Brzeski speaks of a bell in the run-up to the 2025 national elections, while Helena Visbert of the Duisburg Center for Automotive Research puts it bluntly that “from a strictly economic point of view, there is less and less reason to build cars in the Germany”. The opposition is taking the opportunity to argue that what is happening at VW is just the picture of the German economy after three years of a “traffic light” coalition. Already in the eastern states, the gradual deindustrialization has consequences that are recorded at the ballot box. Some even argue that it is no coincidence that Volkswagen’s announcements were made a day after the elections in Saxony, where the far-right with 30.6% was marginally in second place. In neighboring Thuringia, the AfD triumphed with 32.8%.
In view of the announcements to remove the “guaranteed employment” regime, which the company has continuously renewed since 1994, and the risk of layoffs, the workers for their part have announced “fierce resistance”. Daniela Cavalo directly accused the management of “mishandling” and “lack of ideas”. The main criticism concerns VW’s inability to present a reliable and economical electric model in time – as happened with the company’s founding in 1937 and the legendary “Scarab”. All these years later, it’s almost as if someone took the “people” (Volk) out of Volkswagen (the people’s car), but it’s probably too early to call the end of the German car industry.
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#Germany #Whats #Volkswagen
