considering closing german factories: can volkswagen's deep restructuring bring about a new life?
2024-09-17
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【reporter connection】
original title:
considering closing german factories: can volkswagen's deep restructuring bring about a new life?
germany's volkswagen group recently announced that it is considering closing a car factory and a parts factory in germany to cut costs. the group mentioned in a memo that "the brands under the volkswagen group must undergo a comprehensive restructuring, which involves not only adjustments to the brand structure within the company, but also the possibility of closing factories, especially considering the declining competitiveness of germany as a manufacturing base." this news shocked all walks of life in germany, because as a veteran german automaker, volkswagen has never closed a german factory in its 87-year history. if this decision is finally implemented, it will not only be the first time in the group's history that a german factory has been closed, but it will also mean that it will break its promise not to lay off employees before 2029.
at present, the german automobile industry represented by volkswagen is facing multiple crises: after the russia-ukraine conflict, germany lost its low-priced russian natural gas, and the soaring energy prices raised the production costs of automobiles; the deterioration of germany's economic prospects also dragged down automobile sales and profits, and volkswagen also faced the dilemma of shrinking market share in its most profitable chinese market; it also faced many challenges in electrification transformation, international market competitiveness, and supply chain security. in the past five years, volkswagen's market value has shrunk by nearly one-third, making it the worst performer among major european automakers. the latest financial report shows that the group's operating profit in the second quarter of 2024 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%.
analysts believe that volkswagen's most fundamental problem is its backwardness in the field of electric vehicles. although it has long entered the electric vehicle market, its electric vehicle sales and market acceptance are far below expectations, especially in the competition with international electric vehicle giants such as tesla and some emerging manufacturers. volkswagen is at a disadvantage in battery technology and production costs. some german media analysts said that if volkswagen wants to survive the competition in the chinese market, it must continue to invest heavily in the research and development of electric vehicles. in the foreseeable future, china will remain the world's largest and most important automobile market. if it cannot succeed in china, it will not be able to rank among the top in the global market. volkswagen is tightening its spending in germany in order to increase investment in china.
in order to cope with the many challenges mentioned above, volkswagen decided to conduct a deep restructuring and consider closing some factories to integrate resources and improve efficiency. oliver blume, the group's ceo, said that germany's competitiveness in the global market is weakening and action must be taken to maintain the company's "long-term success." the group's management also said that the plan is part of its cost-cutting. in june 2023, volkswagen group's main passenger car brands announced plans to cut costs by 10 billion euros by 2026 and bring its operating profit margin to 6.5%. however, in the first half of 2024, the operating profit margin of the group's main passenger car brands had fallen to 2.3%. due to the continued deterioration of market conditions, the company believes that the original planned savings are insufficient and has decided to cut an additional 4 billion euros. for this reason, more stringent measures have to be taken, including closing inefficient factories and reducing personnel expenses. at present, volkswagen's factories are spread across germany, and some analysts speculate that the factories in osnabrück and dresden may become potential closure targets.
as soon as volkswagen's plan to close factories was announced, it immediately triggered strong opposition from labor organizations, trade unions and local governments. daniela cavallo, president of the group's trade union, said that this decision was a serious infringement of the interests of employees and that the trade union would "strongly resist". in an interview with the group's internal website, cavallo said that management had made "many wrong decisions" in recent years, including not investing in hybrid vehicles and not speeding up the development of affordable electric vehicles. germany's largest industry union, the german metalworkers union, also said that layoffs and factory closures were irresponsible decisions that would shake the company's foundation and would "lead to major conflicts between management and trade unions."
it is worth mentioning that in lower saxony, where the volkswagen group's headquarters in wolfsburg is located, the state government owns 20% of the group's shares and is the second largest shareholder. the state governor, stephen weil, is also a member of the group's board of directors. when labor disputes occur, the lower saxony state government often stands with the group's trade unions. weil said that volkswagen does need to take measures to cut costs, but he called on it to achieve this goal through other means and avoid closing factories. in the emden region in northern germany, the volkswagen factory is one of the most important employers in the area. the local economy is highly dependent on jobs provided by such large companies. closing the factory will have a catastrophic impact on the local economy. the mayor of emden also said that if this decision is implemented, it will be a "heavy blow" to the entire region.
volkswagen's announcement that it may close its german factory reflects the profound changes that the global automotive industry is undergoing. other german auto giants such as bmw and mercedes-benz are also facing similar difficulties. some electric car manufacturers in other countries are rapidly surpassing german companies in technology and market acceptance. in this context, how to accelerate transformation while maintaining traditional advantages is the key to whether the german automotive industry can continue to maintain global competitiveness in the future. continuous investment in electric vehicle battery technology, production cost control, and electric vehicle infrastructure construction will determine the future competitiveness of the german automotive industry. volkswagen's proposal to close the factory may also be the beginning of more structural adjustments in the transformation of the automotive industry.
(guangming daily, berlin, september 14, guangming daily reporter jiao shusong in berlin)
source: guangming daily
