by Victoria Waldersee
BERLIN (Reuters) – Volkswagen is considering closing factories in Germany for the first time, underscoring the pressure Europe’s biggest carmaker is under from cheap Asian competition.
The move marks the first major conflict between CEO Oliver Blume, who is known to be more of a unifier than his predecessor Herbert Diess, and the company’s unions, which wield considerable influence within the group.
Volkswagen, Germany’s largest industrial employer, is seeking to save billions more as part of a cost-cutting program at its namesake brand, the carmaker and its works council said Monday.
In particular, it considers that a large vehicle factory and a component manufacturing site in Germany are obsolete, according to the works council, which has promised “fierce resistance” to management’s plans.
Analysts have previously identified the sites in Osnabrueck, Lower Saxony, and Dresden, Saxony, as possible closure targets.
The state of Lower Saxony, Volkswagen’s second largest shareholder, supported the revision announced by the group on Monday.
Volkswagen also announced the end of its job security program in place since 1994, which prevented any job cuts until 2029. The group said that all measures will be discussed with the works council.
“The situation is extremely tense and cannot be overcome by simple cost-cutting measures,” VW brand boss Thomas Schäfer said in a written statement.
“BAD DECISIONS”
The Volkswagen brand, which remains the main sales pole of the group which also owns Audi, Seat, Skoda and Porsche, is the subject of a cost reduction program targeting 10 billion euros of savings by 2026 in order to finance the electrification of its range.
The difficult economic environment, increased competition in Europe and the declining competitiveness of the German economy have forced the German manufacturer to take additional measures, said Oliver Blume.
On the Frankfurt Stock Exchange, Volkswagen shares were up 2.4% at 14:58 GMT.
The group has lost almost a third of its stock market value over the past five years, making it the worst-performing stock among Europe’s major carmakers.
This restructuring project of the Volkswagen brand calls into question the foundations of the German group, denounced a representative of the IG Metall union.
“The board of management has today presented an irresponsible plan that shakes the foundations of Volkswagen and poses a massive threat to jobs and sites,” Thorsten Gröger said in a statement released after the group’s announcements.
Daniella Cavallo, head of the works council, said in an interview posted on Volkswagen’s intranet that management had made “many bad decisions” in recent years, including failing to invest in hybrid vehicles or developing affordable battery-electric cars more quickly.
CFO Arno Antlitz will address employees alongside Thomas Schäfer at a works council meeting on Wednesday morning.
CHINESE COMPETITION
Volkswagen has seen its market share in China, its largest market, shrink as Chinese rivals launch affordable electric cars.
Chinese manufacturers are also beginning to establish themselves in Europe, which increases the pressure on the German group to quickly develop cheaper electric cars in order to avoid losing sales in its home country.
Volkswagen’s plans are the latest blow to German Chancellor Olaf Scholz, who is under pressure after his ruling three-party coalition was derailed in regional elections on Sunday.
Germany’s economy ministry declined to comment specifically on Volkswagen’s announcement on Monday, but said company management had to act responsibly in a difficult market environment for the auto industry.
“The automotive industry is facing major challenges worldwide and is undergoing a profound transformation that requires companies to make strategic decisions,” a ministry spokesperson said in an emailed statement.
“Every company is responsible for its employees and its sites, and companies must take that responsibility when making decisions,” he said.
(Written by Victoria Waldersee, with contributions from Rachel More, Diana Mandiá, edited by Blandine Hénault)
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