The crisis that the Volkswagen Group makes the manufacturer consider unprecedented solutions, especially for the first manufacturer in Europe and the second largest manufacturer in the world: manufacture cars for third parties.
The Volkswagen Group would thus put one of its largest factories to produce cars from rival brands of the group, according to sources from Bloomberg. It is just a proposal considered by the group’s management in negotiations with the unions to avoid the closure of a factory that employs almost 9,000 people.
Between a rock and a hard place: too many factories and not enough cars to manufacture
The Volkswagen Group and unions discuss how to restructure Europe’s largest carmaker. After confirming the closure of the Audi factory in Brussels, despite the fight by the unions, Volkswagen assures that it also needs to close factories in Germany, something never seen since the birth of Volkswagen in the ashes of the Second World War.
According to the manufacturer’s works council, the management aims to realize global cuts worth 17 billion eurosof which the reduction in salaries and freezing of bonuses would be a small part. The company is considering much more radical measures than unions are willing to accept, such as closing or selling several factories in Germany.
The plants currently on the tightrope would be those of Emden (8,900 employees), that of Osnabruck (2,300 employees) and that of Dresden (340 workers). This is more than 11,500 jobs threatened. In Germany, the group has more than 290,000 employees, 43% of its global workforce. Thus, closing even just one factory on German soil can be traumatic.
For the group’s management and analysts, the The problem is not the product but the costs too many highs in Germany that the group endures. Energy is more expensive than in most countries and salary costs of group are 25% higher than the German average and, with an average of 62 euros per hour in 2023, they are the highest in the automotive industry worldwide. In France, the labor cost in the industry is 47 euros per hour and in Spain, 29 euros per hour.
The Volkswagen Group is in a delicate position in which it does not have the flexibility that other manufacturers have due to its own internal structure. Workers’ representatives hold half of the company’s supervisory board seats, while the state of Lower Saxony, where the Osnabrück and Emden factories are located, has two other seats.
“Management has proposed selling the Osnabrück and Dresden plants, according to people familiar with the matter. Volkswagen is also considering the possibility of using its Emden plant for manufacturing for third parties“said the people, who asked not to be named because the negotiations are private,” they explain from the economic portal.
Osnabrück was a factory inherited from the defunct coachbuilder Karmann, which currently manufactures the Volkswagen T-Roc Cabrio and the latest Porsche 718 Boxster and 718 Cayman destined for the United States and Canada, since they are no longer sold in Europe. Beyond 2026, the factory does not have any assigned models.
As for the one in Dresden, more than a factory it has been a curious marketing exercise, since it is the Gläserne Manufaktur, the glass factory. After manufacturing the Volkswagen Phaeton at a very slow pace, a loss-making luxury super sedan whose sole purpose was to share expenses with Bentley and Audi so that the recently acquired English brand would not be burdened with the entire development cost of its new platform. Now with only 340 employees, we manufacture a few units per month of the Volkswagen ID.3.
As to Emdenis without a doubt the factory that costs the group the most. Emden’s 8,900 employees They produce the Volkswagen ID.4 and ID.5 as well as the new ID.7all are electric models. This factory has a capacity of up to 300,000 cars per year and plans to manufacture 140,000 cars in 2024. With three different models, it is less than 50% of its capacity. And a car factory is profitable when it operates at more than 80% of its capacity.
The Volkswagen “glass factory” with the Volkswagen ID.3 assembly line.
Without a doubt, the unions will not accept the closure of this factory, as it would mean almost 9,000 people without jobs. Hence, the manufacturer’s own management has proposed opening its assembly lines to third parties. And these third parties could even be rival brands. Of course, from there to thinking that Volkswagen will start manufacturing Chinese cars for Europe, there is a stretch that we will not cross.
In any case, the reality is that Volkswagen reported its least profitable quarter in years last month, which reinforces management’s arguments for taking drastic measures.
The goal of Oliver Blume, the CEO of the German group, to fix Volkswagen has become more urgent as the group’s premium brands, Porsche and Audi, face increasing difficulties, with supply chain problems, delays in the models and a huge slowdown in demand for these luxury cars in Chinawhich reduce their profits.
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Source: www.motorpasion.com
