news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

compiled by yang yuke

editor | li guozheng

on september 4, 2024, in wolfsburg, germany, volkswagen group management faced the works council and angry workers over cost-cutting measures such as planned factory closures.

wolfsburg, also known as "wolfburg", is a small city in northwestern germany and the headquarters of the volkswagen group.

earlier, reuters reported that volkswagen group is considering closing a vehicle plant and a parts plant in germany, which would be unprecedented in the 87-year history of europe's top automaker.

making matters worse for volkswagen group's 650,000 employees worldwide, management intends to end a job guarantee program that has been in place since 1994 and promised no layoffs before 2029.

rising costs are cutting into volkswagen group's profits, leaving it facing "particularly significant challenges", the group said in an internal memo seen by afp. the memo said that despite previously announced cost-saving measures, "current developments in the automotive market and the german economy require further action".

"under the current circumstances, the possibility of closing car production and component plants cannot be ruled out," volkswagen group said in a notice to employees.

the volkswagen brand is the main force of volkswagen group's sales and the first brand of the group to carry out cost cuts, with the goal of saving 10 billion euros (equivalent to 11.07 billion us dollars) by 2026. however, according to handelsblatt, this is not enough and the volkswagen brand needs to cut an additional 4 billion euros.

to make matters worse, falling demand and rising logistics, energy and labor costs in germany during the electrification transition have made it more difficult to increase returns on the volkswagen brand, which saw its profit margin fall to 2.3% in the first half of this year, compared with 3.8% in the same period last year.

"the economic environment has become more challenging and new players are entering europe," volkswagen group ceo oliver blume said in a statement. "in terms of competitiveness, the german business environment is falling further behind."

as a result, the 10 brands of the volkswagen group must be completely restructured. "plant closures can no longer be ruled out," blume said, adding that layoffs through early retirement and severance packages would no longer be enough, so it was "necessary to end the employment protection agreement that has been in place since 1994".

germany's ig metall union has launched a "fierce resistance" to plans to close factories and lay off workers.

"the management board has today presented an irresponsible plan that will shake the foundations of the volkswagen group and pose a huge threat to jobs and factories," said thorsten groeger, chief negotiator of the german metal workers union, in a statement. "we will not tolerate plans that are made at the expense of employees."

in a statement, volkswagen group works council chairwoman daniella cavallo called volkswagen group's board a "failure" and its management had made "many wrong decisions" in recent years, including not investing in hybrid models or speeding up the development of affordable electric vehicles.

in an interview on volkswagen group's intranet, cavallo said that instead of closing plants, the board should reduce complexity and use synergies between the group's factories.

volkswagen group has about 650,000 employees worldwide, nearly 300,000 of whom are in germany. the group produced about 9 million vehicles worldwide last year, with a total production capacity of 14 million.

“this is a disaster”

the volkswagen group was a key driver of germany's post-war economic rise. with the launch of many successful models such as the beetle, golf and type 2 bus, the volkswagen brand gradually consolidated its position as a household name and global automotive leader.

but in the age of electric vehicles, things aren't going as planned.

"the future of the volkswagen brand is at risk." thomas schäfer, who had just taken over as ceo of the volkswagen brand, warned his management team in early july last year. he did not sugarcoat the problems. high costs, falling demand, increasing competition - the list went on. "the roof is on fire," he warned.

now it seems that he was not exaggerating.

all the problems are concentrated in wolfsburg, which is what shi wentao calls the "roof". according to media reports, volkswagen group's electric vehicle orders are 30% to 70% lower than planned. the company still faces software problems. in china's fast-growing electric vehicle market, the volkswagen brand has performed mediocrely.

bloomberg cited a volkswagen worker and chief negotiator as saying that the group's electric vehicle production plans "have become a disaster." this is especially true for the audi q8 e-tron, whose production may end early due to the company's plan to permanently close its plant in brussels.

the shift to electric cars was supposed to be a new chapter for volkswagen, but so far the group has faced a sales and software nightmare. it hasn't fared well in the u.s., either. the long-awaited rear-wheel-drive id.buzz has a maximum range of just 234 miles. volkswagen has also indefinitely delayed the launch of the id.7.

cheaper vw-branded electric cars won’t appear until the end of the decade, while ford, tesla, kia and gm plan to launch a slew of electric cars in 2025 and 2026. vw is less profitable in europe, its market share in china is collapsing and its footprint in the u.s. is still tiny.

the volkswagen group is facing two competition-related challenges - one it has no control over and one of its own making.

the first is that chinese automakers are taking market share from volkswagen group in china, which once had the highest market share of any automaker. the company’s sales in china will fall from 4 million vehicles in 2017 to 2.5 million in 2024, according to michael dunne, an analyst at dunne insights.

and chinese rivals are bringing cheap electric vehicles to another key market for volkswagen: europe.

the second is that volkswagen group is a bloated company compared with its rivals, which means it has less room for error.

the company will have nearly 650,000 employees in 2023, about 309,000 more than ultra-efficient toyota motor, which sold about 2 million more vehicles worldwide last year.

not only was volkswagen facing operational problems and increased competition in key markets, it was also falling behind technologically.

the company recently agreed to invest in rivian to get the u.s. startup's help in electric vehicle development. last july, volkswagen group announced plans to invest $700 million in xpeng motors and jointly develop pure electric models based on their respective core competencies.

of course, plant closures aren't just a problem for volkswagen group. they would cost tens of thousands of workers their jobs and threaten the towns built around them. negotiations are ongoing, but the question looms: will other automakers follow volkswagen's lead, sparking a wave of plant closures as they scramble to cut costs and compete with china?

it's a real dilemma. volkswagen and stellantis have been caught off guard by the electric car race. apart from working hard to reduce costs, actively develop software and build affordable models, they seem to have nowhere to go.

who is the lamb to be slaughtered?

which volkswagen group plants in germany will be closed? which plants will be affected by the layoffs?

volkswagen group has not yet provided specific figures on how many jobs in germany could be cut or which plants could be closed. however, according to a statement from the powerful volkswagen works council, management believes at least one car plant and one parts factory in germany need to be closed.

there is speculation that the osnabrueck plant in lower saxony or the dresden transparent factory in saxony may be closed.

the following german plants could be affected by the cost-cutting measures, the german metall union said. all are in the northwestern state of lower saxony, with the exception of the kassel plant in the central german state of hesse.

brunswick plant:vw's oldest plant. as of 2022, it employs around 7,400 workers. it produces components such as front and rear axles, steering and battery systems as well as machinery, equipment, tools and moulds. since 2019, it has also been manufacturing batteries for vw's new modular electric drive meb cars.

emden plant:the plant was established in 1964 to take advantage of the nearby seaport and initially specialized in the production of beetles. it now produces models such as the volkswagen passat and the volkswagen electric id.4. the plant has more than 8,000 employees and produces about 180,000 vehicles a year.

hanover plant:the plant employs around 14,000 people in lower saxony, the second-largest shareholder of the volkswagen group. production of the volkswagen "bulli" began here in 1956 and now produces the sixth generation of the t-series vans and minivans, as well as the amarok pickup. in addition to cars, it also produces components such as cylinder heads and intake manifolds.

kassel plant:part of the volkswagen group since 1958, the kassel plant is volkswagen's largest parts plant worldwide, producing more than 4 million manual and automatic transmissions per year. the plant is the largest employer in northern hesse, employing around 16,500 people.

salzgitter factory:established in 1970 to produce the volkswagen k70 sedan, the plant employed around 7,500 workers as of 2023. the company now produces engine variants as well as electric vehicle components. volkswagen group invested €2 billion in 2021 to transform the main engine plant into the group's main battery plant.

wolfsburg factory:the wolfsburg plant is the production center of the volkswagen group and is also the headquarters of the group. the plant covers an area equivalent to 910 football fields and employs about 70,000 people. the company was founded in 1938 and it produced nearly 500,000 vehicles in 2023, including the volkswagen golf.

the cost-cutting measures may include the emden plant in northern germany.

the volkswagen group is one of the most important employers in the region of east frisia.

"the prosperity of east frisia depends heavily on these companies," tim kruithoff, mayor of emden, told dw. "every loss of a unionized industrial job is a big blow to the entire region."

emden's mayor has been backed by union leaders such as grogg, who called vw's factory closures an "irresponsible plan". the head of the region's metalworkers' union told reuters the plan was "not only short-sighted, but also very dangerous" and could "break the heart of the volkswagen group".

meanwhile, volkswagen group's works council is particularly angry about the group's reluctance to clarify who could be affected and how. "this puts all german plants in the crosshairs - whether it's a volkswagen plant or subsidiary in western or eastern germany today," cavallo said.

however, many experts believe that the closure of volkswagen group's factories in germany is inevitable. helena wisbert, director of the center for automotive research in duisburg, germany, believes that "there is no other way."

she told spiegel that so far, low capacity utilization at factories could be offset by cost savings from suppliers. "but this is clearly no longer enough," she added.

moritz schularick, president of the kiel institute for the world economy, sees the cost-cutting measures announced by volkswagen as the beginning of a transformation in the german auto industry and urges the german government not to intervene in the troubled automakers.

“we should not stand in the way of structural reforms. new industries are desperately looking for workers,” he told german business weekly wirtschaftswoche.

obermu's dilemma

driving reform is a delicate task, especially at volkswagen group.

a full-blown labor dispute would be a major test for blume, who also heads the porsche brand, after union clashes led to the ouster of several of his predecessors.

previous clashes ended or shortened the tenures of several executives, including former chief executive officer bernd pischetsrieder, former vw brand chief wolfgang bernhard and former chief executive officer herbert diess, who all tried to increase efficiency, particularly at vw’s domestic operations in germany.

blume has battled slowing demand for electric vehicles and chinese rivals since taking over as volkswagen group ceo on sept. 1, 2022. now he must put aside his usual harmonious and collaborative style to deal with another formidable adversary: ​​germany's powerful labor unions, as the threat of factory closures immediately sparked a backlash from the unions.

half of the seats on the company's supervisory board are held by worker representatives, and the german state of lower saxony, which owns a 20% stake, typically sides with the unions.

the metall union called the threatened layoffs and plant closures an irresponsible decision that "shakes the company to its foundations." "the austerity program has escalated and is leading to a major conflict between management and the general labor union," the company said in a statement.

experts are already talking about a major paradigm shift at germany's largest industrial employer. due to its shareholder structure, volkswagen group has always been a business controlled by the state and the porsche family.

lower saxony owns a fifth of the company and has a permanent seat on the supervisory board, meaning securing jobs and the factory has always been seen as a matter of the state’s interest.

ferdinand dudenhöffer, founder and director of the german center for automotive research, believes this is an "old problem for volkswagen" because the automaker is "more like a state-owned enterprise than a market-oriented company." he told dw that the problem will persist as long as volkswagen's corporate structure remains "flawed."

for decades, volkswagen group’s governance structure gave the state of lower saxony, which retained 20 percent of the voting rights and could block key decisions after the company was taken over by germany’s federal government (which later sold its stake) and the state after world war ii, outsize influence over the group.

labor representatives make up half of vw's supervisory board, which requires two-thirds approval for decisions on production locations. the law on the issue states that a two-thirds majority is required for "building and relocating production facilities," without mentioning actual closures.

that could give management wiggle room, according to people familiar with the matter, while unions could argue that relocation is similar in nature to a closure.

its leadership structure "paralyzed vw - made it 'ungovernable' and destroyed it," said ferdinand dudenhoeffer, head of an automotive think tank at the university of duisburg-essen in germany. "that's why for 40 years we have seen crises at the volkswagen group erupt again and again, as is happening now."

lower saxony state premier stephan weil has already criticised volkswagen group management, saying there is "no alternative to the problem of plant closures".

germany's auto industry has cemented the country's codetermination model, in which workers are represented on company boards, with volkswagen ag being a prime example. the industry's powerful works councils provide the metall union with vital resources, from money to information.

employee representatives make up half of the 20-member supervisory board, giving them regular updates on the state of the company and the power to veto strategic decisions.

for blume, 56, whose sprawling empire has been battered by growing competition, especially from china, the volkswagen group ceo has no choice but to go head-to-head with the metall union.