The factory closes, the worker is angry, profits fall: is this what Volkswagen has become today?

Robert Habeck the head of the economic ministry will hold this certain “automotive summit” next Monday: based on the ministry’s information, the German Automotive Association, which represents both car manufacturers and auto parts suppliers, will participate in the crisis consultation, in addition to the large manufacturing companies and suppliers, and the Germans, together Europe’s largest trade union, it is IG Metal is.

This much can already be known about Monday’s industrial meeting at the ministerial level: Robert Habeck is inclined to provide additional state support to Germany’s struggling car manufacturers. THE Volkswagen-group (VW) during his visit to one of the electric car manufacturing plants in the North-West on Friday he stated: feels obligated to do something to restart the market.

The inevitable downsizing, or has Europe fallen?

In order for the automotive concern to become more competitive than it currently is on the shrinking European market, Oliver Blumethe CEO of the company group considers the company’s headcount in Germany to be realistic in the medium term reduction of 30,000 peoplewhich would represent about 10 percent of the country’s workers – the ominous statement swept through the week in the German and international press.

The planned downsizing would primarily affect the research and development layer, within which four to six thousand jobs would disappear. Chief Financial Officer of the VW Group, Arno Antlitz wants to reduce investments from 170 billion euros to 160 billion euros over the next five years, as European demand has not recovered since the epidemic, and the company failed to sell about half a million cars he announced.

At the beginning of this month, the group’s financial manager also spoke at the car manufacturer’s headquarters in Wolfsburg it does not expect sales to recovertherefore, Volkswagen must definitely reduce expenses and transform its production. The company group’s spokesperson also confirmed this week that the car manufacturer has to cut costs at its German sites.

At the same time according to the VW works council, the reduction of 30,000 is completely unfounded. Herbert Diessthe company’s former CEO warned as early as 2021: 30,000 jobs in German car manufacturing may be at risk amid the industry’s electric transition. The rebuke eventually destroyed Herbert Diess’ relationship with the unions to such an extent that it partly led to him losing his job.

Close the factory, but which one?

It was revealed at the beginning of the week that Volkswagen is opening a new page, i.e. already in the current quarter, it will start to reduce capacity, taking the necessary the formation of provisions reaching up to 4 billion euros wrote the Reuters. The paper also recalls that Volkswagen announced at the beginning of the month: for the first time in its career, it is considering closing one of its plants in Germany in order to cut costs.

A clear example of the lack of a plan B and the company’s determination is that, in the name of restructuring, Volkswagen last week terminated the long-standing job protection program at its six German plants, and thus entered into a serious conflict with the powerful unions, which predicted fierce resistance to any similar “infringement of rights” ” opposite.

I wonder which German factories may be overtaken by fate?

1. Brunswick: Volkswagen’s oldest plant employed about 7,400 workers in the city of about 250,000 in 2022 and rolls off production lines, among other things, front and rear axles, steering gears, batteries and tools.

2. Emden: founded to take advantage of the nearby seaport, the plant originally specialized in the production of the VW Beetle when it opened in 1964, but today it produces models such as the VW Passat and the VW electric ID.4. With its 8,000 employees, the plant produces around 180,000 vehicles a year.

3. Hannover: the factory here employs around 14,000 people in Lower Saxony.

4. Kassel: the Volkswagen factory here is the largest employer in the province of North Hesse, employing nearly 16,500 employees. In addition to parts for the brand’s commercial vehicles, they also produce certain parts for SEAT, Audi, Skoda, Porsche and Lamborghini vehicles.

5. Salzgitter: the factory opened in 1970 for the production of the Volkswagen K70 model employed 7,500 workers based on last year’s data, and today typically produces components for the brand’s electric vehicles. In 2021, the company announced an investment of 2 billion euros to transform its former main engine factory into the group’s number one battery factory.

6. Wolfsburg: the huge plant in Lower Saxony is one of the “powerhouses” of the company group’s production, employing nearly 70,000 people in an area the size of 910 football pitches. It is not for nothing that the factory here is called the “car city”, which was built a year after the foundation of Volkswagen in 1937, and in 2023 it produced nearly half a million vehicles, including the VW Golf.

7. Dresden: here it is a smaller production unit, established in 2001, which operates with 340 employees and also serves as a training workshop for the future generation. After producing models such as the VW Phaeton or the Bentley Flying Spur here for many years, it switched to electric vehicles in 2017, starting with the e-Golf and most recently the ID.3 model.

8. Osnabruck: the plant taken over from Karmann in 2009 mainly manufactures vehicles and body parts for the VW, Skoda, Porsche and Bentley brands, the site also specializes in small series work, for example the production of convertibles and roadsters. Here, they have practically created a manufactory with 2,300 employees from technical development to tool making to vehicle production to create special models such as the Porsche Cayman, Porsche Boxster and T-Roc Cabriolet.

Floating market dominance

It’s not just Volkswagen, the entire German car industry has been producing poor sales figures for some time now, and quite simply unable to afford the price of the electric transition. While VW reported a 14 percent lower profit in the first half, BMW’s profit fell by nearly 15 percent, and Mercedes’s by almost 16 percent. The crisis is also affecting automotive suppliers.

George Galliersaccording to a Goldman Sachs analyst new car sales in August key markets France, Germany, Italy and Spain saw double-digit year-on-year declines. The annual sales rate of the four countries fell by 16.7 percent, reflecting the difficult European macroeconomic economic environment.

How does everything add up and result in the crisis of the German car industry?

• the push and business success of Chinese competitors, with which they carve out an ever-larger slice of the market pie;
• the European car manufacturers all have an ever-decreasing share in the sale of electric vehicles;
• China’s BYD increased its market share from 14.7 percent in the second quarter of 2023 to 17.2 percent by July 2024, consolidating its position as the global leader in electric vehicles and at the same time dethroning Tesla;
• for example, Stellantis’ market share fell from 4.0 percent a year ago to 2.7 percent in July, Volkswagen’s from 7.5 percent to 6.6 percent, while Mercedes-Benz’s share shrank to only 1.9 percent;
• the still high cost of electric vehicles compared to internal combustion vehicles;
• despite having lower long-term running costs, the initial purchase price of electric cars, even after government subsidies, is about 20 percent higher than their internal combustion engine counterparts in major markets such as Germany and France;
• in addition to all this, there is still a kind of customer distrust of electric vehicles, whether they really prove to be a good investment in the long term.