Volkswagen to scrap three vegetation and 1000’s of jobs – DW – 10/29/2024 | EUROtoday

Volkswagen plans to close not less than three factories in Germany, lay off tens of 1000’s of workers and shrink its remaining vegetation in Europe’s greatest financial system, the corporate’s works council head, Daniela Cavallo, mentioned on Monday, disclosing particulars of a brand new financial savings plan at Europe’s greatest carmaker.

VW administration has been negotiating for weeks with unions over plans to revamp its enterprise and reduce prices, together with contemplating plant closures on residence soil for the primary time within the firm’s 87-year historical past.

“Management is absolutely serious about all this. This is not sabre-rattling in the collective bargaining round,” Cavallo advised staff on the carmaker’s greatest plant, in Wolfsburg, and added: “This is the plan of Germany’s largest industrial group to start the selloff in its home country of Germany.”

At the second, neither Cavallo nor VW’s administration have specified which vegetation could be affected or what number of of Volkswagen Group’s roughly 300,000 workers in Germany may very well be laid off.

Cavallo’s feedback mark a serious escalation of a battle between VW’s staff and the administration, as the corporate faces extreme strain from excessive vitality and labor prices, stiff Asian competitors, weakening demand in Europe and China and a slower-than-expected electrical transition.

As occasions are altering

Over many a long time, and with the assistance of politicians, administration and labor unions have carved out a particular relationship. After the partial privatization and stock-market itemizing of the previously state-owned carmaker in 1960, staff represented by the highly effective metalworkers union IG Metall achieved an settlement that allowed them to decide out of the kind of industry-wide collective bargaining settlement frequent in German {industry}.

Since then, VW wages have been considerably increased than these at different producers, and within the Nineteen Nineties employee representatives secured a 35-year job assure that dominated out job cuts till 2029. This job assure has now been unilaterally scrapped by the VW administration citing “particularly significant challenges” reminiscent of rising prices slicing into firm earnings.

“There’s hardly a company that’s a stronger symbol for Germany’s [post-war] economic miracle, for the wealth that’s been accumulated and for the global reputation of ‘Made in Germany’ than Volkswagen,” Marcel Fratzscher, the president of the German Economic Institute (DIW), advised DW.

VW disaster unfolding amid European automotive hunch

In 2023, the 10-brand automotive group nonetheless posted sound earnings totaling greater than €18 billion (19.7 billion), and paid out €4.5 billion in dividends to shareholders. Nevertheless, VW administration launched an effectivity program final yr aimed toward saving €10 billion by 2026 to spice up competitiveness.

In August 2024, nonetheless, administration mentioned additional financial savings measures had been required after disappointing outcomes confirmed an anticipated dip in general gross sales to €320 billion — about 2 billion lower than the earlier yr.

The decline has come as automotive gross sales throughout Europe typically are down by 2 million automobiles, in contrast with ranges earlier than the COVID-19 pandemic. For VW, this implies promoting about half one million fewer vehicles — roughly equal to the manufacturing capability of two vegetation, as VW finance chief Arno Antlitz mentioned through the presentation of firm figures in September.

Stefan Bratzel, founder and director of the Center of Automotive Management (CAM) in Bergisch-Gladbach, Germany, says overcapacity is an issue for all German carmakers as a result of their factories are at the moment working at solely round two-thirds of their most output capability. For a plant to be worthwhile, he advised DW, “production levels should ideally exceed 80%” relying on the mannequin.

Bratzel mentioned carmakers primarily based in France, Italy and the UK had been experiencing a equally dire state of affairs, whereas these in Spain, Turkey, Slovakia, and the Czech Republic are nonetheless working at round 79% capability due to decrease manufacturing prices.

And but, Germany nonetheless produced extra vehicles in 2023 than every other European nation, based on newest {industry} information.

Thomas Puls, a transportation professional on the German Economic Institute (IW), notes, nonetheless, that automotive manufacturing in Germany has steadily gone down in recent times, dropping by about 25% since 2018. Also, gross sales of electrical automobiles (EVs) made up solely 1 / 4 of the 4 million vehicles offered general in Germany final yr, he advised DW.

Industry transformation positive aspects traction as China muscle tissue in

According to a report by German auto {industry} affiliation, VDAGerman producers’ wage prices are the best on the earth, averaging over €62 per hour in 2023. By comparability, hourly labor prices are €29 in Spain, €21 within the Czech Republic, and simply €12 in Romania.

German carmakers’ manufacturing prices have been managable due to their largely high-end premium fashions, of which roughly three-quarters had been exported abroad. In latest years, not less than 20% of the vehicles produced right here went to China.

The IW suppose tank wrote it is not doable to provide cheaper fashions with decrease margins in Germany, which is why French and Italian carmakers had moved their manufacturing of mass-market vehicles to cheaper places way back.

Auto professional Bratzel additionally thinks that it is “extremely difficult to produce affordable vehicles — especially affordable electric vehicles — in Germany,” including that the final German EV maker making an attempt to do that was named e.Go and went bankrupt solely lately.

What’s much more worrisome for German carmakers than excessive manufacturing prices is the technological edge secured by their rivals from China, notably within the EV market. Thanks to lavish state subsidies and regulatory measures, they’ve made huge technological strides in key EV elements reminiscent of batteries which they’ll produce cheaper now.

“The technological transition has opened the door for new competitors whose strengths lie in battery and electrical engineering,” an IW report says, in order that “almost a third of all cars produced worldwide now come from Chinese factories, where production costs are significantly lower.”

Stefan Bratzel says Chinese producers are in a greater place concerning EVs as a result of ” they’ve gained a lot more experience and implemented efficiency improvements.”

The aggressive advances China has made are being mirrored in European automotive manufacturing figures that present an general decline of 40% because the yr 2000, with France and Italy even dropping by about 50%. Only German carmakers have been managing to carry their floor considerably, IW has discovered.

Emission targets: The remaining blow to Europe’s carmakers?

Some carmakers in Europe at the moment are additionally warning they might incur billions of euros in fines if they can not meet the EU’s formidable local weather objectives attributable to falling EV gross sales. The present fleet common goal of 115.1 grams of CO2 per kilometer traveled will lower by round 19% in 2025 to 93.6 g/km.

Renault Chief Executive Officer Luca de Meo advised France Inter radio in September the European automotive {industry} might face penalties of “as much as €15 billion.” The European automotive {industry} physique, ACEA, is already calling for an “urgent review” of emissions guidelines to be utilized in 2025.

The ACEA board, which incorporates the chief executives of Renault, Nissan and Toyota, mentioned in a press launch that carmakers confronted the “daunting prospect of either multibillion-euro fines . . . or unnecessary production cuts, job losses, and a weakened European supply and value chain.”

Amid these challenges, VW administration is now trying to tighten the screws on its staff, who’re demanding a 7% wage improve, no layoffs, and no plant closures.

This article was first revealed on October 7 and has been up to date on October 29 to incorporate the most recent developments at Volkswagen.

This article was initially revealed in German.