volkswagen considers closing its domestic factories for the first time, responds to the paper: we are facing challenges and must take decisive measures
2024-09-07
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"based on the current situation, the group does not rule out the possibility of closing vehicle and parts plants unless there are other rapid response measures."
since its establishment 87 years ago, volkswagen group of germany has made the above statement, considering the closure of two local factories "unprecedentedly". according to a report by xinhua news agency on september 3, volkswagen group of germany announced the decision a few days ago.
the group told the paper (www.thepaper.cn) that decisive action must be taken due to factors such as germany's declining competitiveness as a manufacturing center and the economic environment.
volkswagen's current predicament is a microcosm of germany's economic malaise. according to the autumn forecast released by a german economic think tank recently, germany's gross domestic product may shrink this year, showing a downward trend compared with the previous summer forecast.
the rise of the far right in germany may make the situation worse. in the eyes of the german business community, the far right's anti-immigration and protectionist stance may make it difficult for companies to recruit the skilled labor that is currently needed, and may even lead to companies relocating. this is not good news for the german economy.
considering closing local factories for the first time in 87 years
according to reuters on september 3, after volkswagen group announced that it was considering closing its domestic factories, german economy minister habeck said that he was in contact with the group. in a statement, habeck said that the group's decision must be closely consulted with social partners and "must keep in mind the goal of ensuring that germany continues to be a strong automotive center."
in this regard, oliver blume, ceo of germany's volkswagen group, told the paper that the group must take further measures in the face of a difficult economic environment, industry competition, and germany's weakening competitiveness as a manufacturing center.
volkswagen reportedly announced last year a cost-cutting plan to save 10 billion euros (about 78.67 billion yuan) by 2026 and set a target of 6.5% operating profit margin. euronews said that according to volkswagen group, the group's first-half results showed that this goal could not be achieved.
if the plant closure plan is implemented, it will be the first time that volkswagen has closed a plant in germany, its "home base", since its founding in 1937. according to deutsche presse-agentur, volkswagen has not closed a plant since it closed a plant in pennsylvania, the united states in 1988.
at the same time, volkswagen group will have to end the employment protection agreement that has been in place since 1994, which promised no layoffs until 2029. xinhua news agency quoted some analysts as saying that this will trigger the first major conflict between blume and the union. the union has considerable influence within volkswagen. the union vowed to "fiercely resist" the factory closure and layoffs plan.
volkswagen group said that from the perspective of the board of directors, the brands within the group must be fully reorganized to achieve the goal of optimizing product and material costs, sales performance, factories and labor costs. if countermeasures are not taken quickly, the possibility of closing automobile production and parts factories cannot be ruled out.
"that is why (the group) wants to start discussions with employee representatives as soon as possible to explore the possibility of sustainably restructuring the brand," thomas schäfer, ceo of volkswagen passenger cars brand, told the paper.
a wake-up call for the german economy
reuters reported that ing economist carsten brzeski believed that "if such an industrial giant has to close its factories, it may be a long-overdue warning that (germany's) economic policy measures need to be significantly strengthened."
the guardian reported that volkswagen's difficulties come at a time when the german economy is facing a broader crisis.
the autumn forecast report released by the kiel institute for the world economy, a german think tank, on september 4 showed that germany's gross domestic product (gdp) will shrink again this year, down 0.1% from 2023. in the summer forecast released earlier, the think tank predicted that germany's gdp would grow by 0.2% this year.
at the same time, the report predicts that germany's gdp will grow again in 2025 and 2026. germany's economic growth rate is expected to be 0.5% in 2025, down from the previous forecast of 1.1%. the initial forecast for germany's economic growth rate in 2026 is 1.1%.
the kiel institute for the world economy pointed out that the main reason for the downward adjustment was that the positive signals of germany's economic development in the middle of the year have not been consolidated.
moritz schularick, director of the kiel institute for the world economy, believes that the german economy is increasingly falling into crisis, which is not only an economic cyclical crisis but also a structural crisis.
"the german government's budget cuts have exacerbated the dilemma, while the ecb's interest rate adjustments have come too late for germany. what's more, germany's old core industries have long resisted change. germany's economic needs require attracting foreign skilled workers. but the debate over asylum is poisoning this conversation. as long as this situation remains, our opportunities for growth will be reduced," said shularik.
the rise of the far right has made matters worse
reuters reported that the german economy is also facing difficulties due to changes in german politics.
germany's far-right alternative for germany, known for its anti-immigration stance, performed strongly in two previous state elections in eastern germany: it won the thuringia state election and became the second largest party in saxony's state parliament.
but german business leaders have warned that far-right extremism could pose a threat to europe's largest economy because it could make it difficult to attract skilled labor, investment and more.
reuters said that in january this year, volkswagen group issued a statement on the rise of far-right forces in germany. the statement read: "we are a global company, our products are sold in more than 150 countries, and we advocate cosmopolitanism, free exchange across borders, and open and fair world trade. therefore, we oppose protectionism, brexit, climate change denial, and instrumentalization of economic issues to fuel resistance to necessary transformation."
"deutsche welle" further reported that marcel fratzscher, director of the german institute for economic research (diw), believes that according to the policies of the alternative party advocating trade protectionism, reducing immigration, reducing openness and diversity, there may be a loss of companies and skilled workers, further leading to more bankruptcies and company relocations.
the paper reporter zhu runyu
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