Sep 04, 2024 09:26 PM IST
Volkswagen defended plans to consider unprecedented factory closures in Germany, saying flagging car sales have left the company with about two plants too many
Volkswagen AG defended plans to consider unprecedented factory closures in Germany, saying flagging car sales have left the company with about two plants too many.
Demand in Europe hasn’t recovered since the pandemic, with industrywide auto deliveries in the region around 2 million short of its peak, Chief Financial Officer Arno Antlitz said at an employee assembly in Wolfsburg. Workers heckled Antlitz and Chief Executive Officer Oliver Blume when they took the stage.
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Volkswagen has lost sales of some “500,000 cars, the equivalent of around two plants,” Antlitz said, according to prepared remarks. “We need to increase productivity and reduce costs.”
Europe’s biggest automaker this week said it’s weighing whether to shutter sites in Germany for the first time and end job security agreements after years of ignoring overcapacity and slumping competitiveness. The move sets up a showdown with powerful unions as the country’s most important industry fights for its future.
VW’s main target is its underperforming namesake passenger car brand, whose profit margins are getting squeezed amid a sputtering transition to EVs and a consumer spending slowdown. Carmakers in Europe are also struggling to compete with Tesla Inc. and new entrants from China.
At least 16,000 workers joined Wednesday’s meeting in and around the cavernous halls of Volkswagen’s main factory in Wolfsburg, according to a spokesperson for the company’s works council. Many held up signs or chanted “we are Volkswagen — you are not.”
Daniela Cavallo, VW’s top employee representative and a supervisory board member, said at the same meeting that she’ll fight any factory closures, adding that workers shouldn’t have to suffer for management blunders including VW’s poor performance in the US.
While the VW brand still needs to realize €3 billion ($3.3 billion) in cost savings to achieve a €10 billion efficiency program agreed on last year, labor expenses account for only a fraction of that gap, she said.
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“Volkswagen isn’t ailing because of its German sites and German personnel costs,” Cavallo said, according to a prepared speech. “Volkswagen’s problem is that the board of management is not doing its job.”
Volkswagen shares declined 0.9% as of 11:35 a.m. on Wednesday. The stock is down around 15% this year.
Europe is in the center of a global slowdown in the EV transition after a range of countries including Germany and Sweden reduced or removed incentives. With car sales still nearly a fifth lower than pre-pandemic levels, manufacturers including VW, Stellantis NV and Renault SA are operating factories at levels analysts consider unprofitable, according to data from Just Auto.
Volkswagen last year made roughly 9 million vehicles, compared with total capacity of 14 million. Raising returns at the main VW brand has become tougher with higher logistics, energy and labor costs. The nameplate’s margin fell to 2.3% during the first half, compared to 3.8% a year ago.
Antlitz said the company must work together to make the namesake brand competitive again and ensure it can offer quality cars at affordable prices.
“We still have a year, maybe two years, to turn things around,” the CFO said. “But we have to make use of this time.”
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