► Volkswagen looking at German plant closures
► CFO delivers comments to employees
► Brand already in the midst of cost-saving measures
Volkswagen is considering its first ever plant closures in Germany, with the brand’s chief financial officer Arno Antlitz saying during a meeting with plant workers on 2 September that the brand has ‘one, maybe two’ years to turn its fortunes around, according to Reuters.
Slumping demand for electric cars, as well as increasing pressures from new brands arriving from China are cited as reasons for European car makers shaky fortunes of late. Certain brands are even changing stances on electrification, with Audi introducing more combustion-powered models than originally planned and Volvo relaxing its plan to be EV-only by 2030.
‘The market is just not there,’ Antlitz said in front of around 25,000 workers at Volkswagen’s Wolfsburg facility, according to Reuters. Volkswagen is reportedly facing a loss of demand of around 500,000 cars – a figure Antlitz says is equivalent to around two factories-worth of output.
Volkswagen AG CEO, Oliver Blume, added that ‘there are no more cheques coming from China,’ pointing to slowing Volkswagen sales in the country.
The comments during the meeting were met with resistance and protests from employees, with VW Works Council head, Daniela Cavallo, stating that management has ‘massively damaged trust.’ Cavallo pointed to a recent deal between Volkswagen and Rivian to develop software, urging management to explain why that circa £3.8bn investment is more important than German plant workers.
Volkswagen Group CEO: ‘we must act decisively’
In a statement, Volkswagen responded to the day’s events: ‘In 2023, Volkswagen AG launched a Performance Program aimed at improving results to remain economically successful despite the enormous challenges facing the automotive industry. In light of the current challenges, further steps will be necessary to future-proof the company.’
Group CEO, Oliver Blume, said in the statement: ‘The European automotive industry is in a very demanding and serious situation. The economic environment became even tougher, and new competitors are entering the European market. In addition, Germany in particular as a manufacturing location is falling further behind in terms of competitiveness. In this environment, we as a company must now act decisively.’
Volkswagen brand CEO and member of the Volkswagen AG management board, Thomas Schäfer, added: ‘We continue to commit to Germany as a business location. The Volkswagen brand’s Performance Program is well-conceived and yielding results. But the headwinds have become significantly stronger. Therefore, we must now step up our efforts and create the prerequisites for long-term success—for a strong brand, high technical expertise, and an excellent product portfolio. We want to remain the leading volume manufacturer worldwide – and do so on our own strength.’
Volkswagen’s gloomy outlook ahead
The considerations discussed in early September 2024 come after the Volkswagen Group revealed its half-year results for the year a month earlier in August. The report cited that ‘high fixed costs and one-off effects significantly impact the profitability of the Volkswagen brand.’ Volkswagen had already confirmed it would make around €8.4bn-worth of cost-cutting measures between mid-2023 and 2026.
Schäfer said in the August report: ‘despite all the cost-cutting measures already underway we need to reduce our fixed costs still further in order to stay firmly on course in this difficult market environment.’
Patrik Andreas Mayer, member of the Volkswagen brand board for finance, added during the August half-year results announcement that ‘the figures for the Volkswagen brand show very clearly that our efforts so far to reduce costs are not sufficient.’
Those half-year results revealed that Brand Group Core – Volkswagen Group speak for the Volkswagen, Seat/Cupra and Skoda brands bundled together – saw that sales grew by 1.8 per cent compared with the same period in 2023 with most of the growth coming from Cupra and Volkswagen Commercial Vehicles. However, operating profits for the Core group were down 8.2 per cent to £2.9bn and net cash flow dropped by 21.6 per cent.