BERLIN Volkswagen, Europe’s largest car manufacturer, had to start a tough worming this year because demand for cars is weakening.
However, the savings have failed. For example, reducing the population through so-called natural attrition, i.e. retirements, has not been sufficient.
Now the Volkswagen group is even planning to close factories in Germany.
On Wednesday, near Brussels, Belgium, work was supposed to start again at the Audi manufacturing plant – Volkswagen also owns Audi – but the start was cancelled. Belgian media according to the factory will hardly produce any more cars in the future.
“A year, two times to adapt”
Volkswagen is aiming for more than four billion in savings already this year and a total of ten billion in spending cuts in two years of media information by.
– Volkswagen has a year, maybe two, to reduce its operations and adapt to lower sales in Germany, the company’s CFO Arno Antlitz warned on Wednesday while meeting with staff at VW’s headquarters in Wolfsburg.
Company believes it will still making a profit this year, but without cost control it may struggle to remain profitable in the years to come.
The reason is that Volkswagen does not believe that the demand for cars in Europe will return to the level before the corona pandemic. The company expects to sell around half a million fewer cars in Europe each year compared to the pre-pandemic level.
According to CFO Antlitz, it is equivalent to two car factories.
“German cars too expensive”
Experts agree that German manufacturers started moving into electric car production too late. In particular, Chinese electric cars are now rapidly taking over the market, while German sales are decreasing.
For example, an expert in the German automotive industry, a professor Stefan Bratzel estimates that without major changes, Volkswagen as a company may even collapse.
He said of the German Broadcasting Corporation in an interview that VW’s electric car models are simply too expensive for consumers.
Volkswagen stuck to the production of combustion engine cars for too long, so rapid investments in new technologies are difficult and expensive.
The workers are putting the brakes on the closing of the factories
In Germany, employees have strong representation in corporate governance and therefore can influence Volkswagen. From the beginning of the week, the plan to close the factories has met with fierce opposition from both employees and German politicians.
For decades, VW has had an agreement with its employees, according to which jobs will not be cut in Germany at least until 2029. Now it has to back out of the agreement.
According to the employees’ representative, the staff is doing everything possible to ensure that not a single factory is closed. Volkswagen’s car production employs nearly 650,000 workers worldwide, almost half of them in Germany.
When factories are closed, it can mean tens of thousands of jobs. Therefore, both federal and state decision-makers are also concerned about the situation.
Volkswagen’s home state, Lower Saxony, has a 20 percent voting share in the company’s management. It has the right to block decisions. Consequently, Volkswagen’s management cannot pass decisions without the state’s Democratic premier by Stephan Weil approval.
The German government, on the other hand, is now planning more tax breaks for buyers of electric cars. For example, companies could reduce their electric car purchases in terms of taxation clearly more than at present.
This means hundreds of millions of euros in subsidies for electric car buyers from taxpayers’ pockets.
“Germany’s competitiveness is weakening”
Germany’s economic prospects are gloomy anyway. The companies evaluate their current situation as worse than before and evaluate what has been done to the financial managers According to the Ifo surveythat the future is even weaker.
Since Germany is also Finland’s biggest trading partner, its problems are directly reflected in the Finnish export industry.
German business representatives have been warning for some time that Germany’s position in global competition is weakening. This is partly influenced by the rise in energy prices caused by Russia’s war of aggression, which drives companies abroad.
One of the most recent reasons is growing nationalism and outright xenophobia.
CEO of Deutsche Bank, Germany’s largest bank Christian Sewing pointed out on Wednesday the economic newspaper Handelsblatt at the seminar that investors are worried about Germany’s political stability.
– Along with excellent German companies, the stability of society has always been one of the biggest reasons for investing here. Now it is partly questioned, Sewing said.
In the state of Thuringia, the AfD, classified as far-right, became the largest party in Sunday’s elections, in the state elections in Saxony, the AfD was second. The rise of the party is primarily explained by the fact that citizens want changes to Germany’s immigration policy.
The populist leftist BSW, founded only at the beginning of the year, received more than double-digit support figures, partly for the same reason. Now it is very difficult to form a government in Thuringia and Saxony.
In Sewing’s opinion, Germans must be ready to work for success more vigorously than at present.
– Investors already doubted our ability to renew. Now they doubt our performance and our willingness to achieve more, Sewing said.