for the first time in history! volkswagen is considering closing two german factories. can it reverse the serious situation?
2024-09-03
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volkswagen has made a historic decision to close two factories in germany.
on september 2, local time, volkswagen, a veteran german automaker, said it was considering closing a car factory and a parts factory in germany to cut costs. it is reported that this will be the first time in volkswagen's history that a german factory has been closed, which means that it will abandon its promise not to lay off employees before 2029.
volkswagen mentioned in a memo that "the brands under the volkswagen group must be comprehensively restructured." this restructuring not only involves adjustments to the brand structure within the company, but also includes the possibility of closing factories, especially considering the gradual lag in competitiveness of germany as a manufacturing base.
the move was strongly protested by trade unions, but received positive feedback in the market.
unions say move 'shakes volkswagen to its foundations'
foreign media reported that volkswagen plans to discuss these plans with unions later this week. but volkswagen's decision has been severely criticized by unions, with ig metall, germany's largest industrial union, saying the plan "shakes the foundations of volkswagen."
daniela cavallo, president of the volkswagen group's union and a member of the ig metall union, said the union would "strongly resist" the board's proposal. just a few months ago, the union demanded that volkswagen give 120,000 employees a 7% pay increase within a year.
in a report to employees, cavallo said last year's cost-cutting plan fell short of expectations, causing volkswagen's flagship brand to fall into the red. the board therefore questioned german factories, volkswagen's internal collective wage agreement and a job guarantee plan that lasts until the end of 2029.
analysts have predicted that the osnabrück and dresden plants could become potential closure targets. previously, volkswagen had announced plans to save 10 billion euros by 2026.
it is worth mentioning that this is also the first major conflict between volkswagen ceo oliver blume and the volkswagen group's labor union since he took over the company. in the volkswagen group, the labor union has a huge influence, and half of the seats on the company's supervisory board are occupied by labor representatives.
regarding the plan to close the factory, blume said that the automotive industry is in a "difficult situation", the economic environment is deteriorating, and new competitors are entering the european market. volkswagen faces huge competitive pressure in the european market, especially germany, as a manufacturing base, which is lagging behind in competitiveness. the company "must act decisively."
cavallo believes that the company's management has made many wrong decisions in recent years, including not investing in hybrid vehicles and not developing affordable battery electric vehicles more quickly. she also said that instead of closing factories, the board should focus on reducing complexity and making full use of the synergies brought about by volkswagen group's plans.
the lower saxony state government has also chosen to side with the trade unions, and the state government leaders have publicly stated that volkswagen should not even think about closing its factories. wolfsburg, where volkswagen is headquartered, belongs to lower saxony, and the state government owns 20% of volkswagen.
how does volkswagen cope with the severe situation after failing in the chinese market?
despite opposition from many parties, the market reacted positively to the news.
according to reuters, volkswagen's stock price rose 1.2% after the announcement of the plan, showing the market's positive response to the company's cost-cutting measures.
but it is worth noting that volkswagen's market value has shrunk by nearly a third over the past five years, the worst performance among major european automakers.
the latest financial report shows that volkswagen's revenue in the second quarter of 2024 was 83.34 billion euros, a year-on-year increase of 4.1%; operating profit was 5.46 billion euros, a year-on-year decrease of 2.4%; global sales were 2.244 million vehicles, a year-on-year decrease of 3.8%.
volkswagen said in its financial report that sales growth in north america and south america almost offset the impact of declines in other regions, especially the chinese market.
some analysts commented on volkswagen's plan to close factories, saying, "this shows that europe's largest automaker is facing increasing price pressure from asian competitors."
volkswagen has lost its dominant position in the chinese market.
in the first half of this year, volkswagen sold 1.345 million vehicles in china, down 7.4% year-on-year, due to "fierce competition in the chinese market." in terms of market share, china accounts for 30.9% of the global total sales. at its peak, china has always contributed 40% of volkswagen's global market share.
in addition, volkswagen has lost its dominant position in the chinese automobile market for many years. byd sold more than 1.6 million vehicles in the first half of the year, surpassing volkswagen to become the sales champion. judging from the full-year forecast, this situation is difficult to reverse.
volkswagen's failure in the chinese market is related to its slow electrification transformation. in fact, among joint venture automakers, volkswagen is considered to be the fastest in transformation, and its id series sales have been rising in the past two years, but chinese independent brands have a greater first-mover advantage in the field of smart electric vehicles.
now, volkswagen group is making up for its shortcomings by strengthening local cooperation.
last year, volkswagen group officially announced that it would fully participate in the booming chinese electric vehicle market through cooperation between the volkswagen brand and xiaopeng motors, and the audi brand and saic group.
among them, volkswagen and xiaopeng motors reached a technical framework agreement to jointly develop two volkswagen brand electric models, which are planned to enter the market in 2026. volkswagen group acquired approximately 4.99% of xiaopeng motors' shares.
audi and its chinese joint venture partner saic motor are jointly developing a portfolio of intelligent connected electric vehicles for the high-end market. as a first step, audi will enter market segments that have not been covered in china before by launching new electric models.
recently, some media reported that due to "brand image considerations", saic audi's new series of pure electric vehicles developed for the chinese market will no longer use the "four-ring" logo. the new cars will be launched in november this year.
the paper reporter wu yuli
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