Car manufacturing: “Missed the leap into the information economy” – These are the true causes of the VW disaster | EUROtoday

Collective bargaining is heading in direction of its fiftieth hour when Volkswagen boss Oliver Blume and his key managers meet in Berlin on Thursday. It is the automotive firm’s annual administration assembly, with a assessment of the previous yr and an outlook for the subsequent yr.

To the skin world, these concerned maintain again from cheering stories. At the identical time, there’s something however a celebratory temper on the talks between IG Metall and representatives of Volkswagen AG in a resort in Hanover’s Groß-Buchholz industrial space.

The negotiations finish on Friday after greater than 70 hours. Employees and the corporate haven’t fought so arduous collectively for many years. And for a very long time the outcomes weren’t so drastic: by 2030, VW will reduce one in 4 jobs in Germany, 35,000 jobs in whole.

The works will all stay, however might be significantly gotten smaller. In Zwickau, for instance, there’ll solely be one meeting line, whereas the principle plant in Wolfsburg will shrink from 4 to 2 strains. The firm introduced that manufacturing of the Golf and Golf Variant fashions might be relocated to Puebla in Mexico from 2027.

In return, the worker representatives led by works council chief Daniela Cavallo emphasize that there might be no redundancies for operational causes, not less than till the tip of 2030. The workers will forego a wage improve for 2 years, will obtain fewer bonuses and will have to cut back their working hours. VW desires to save lots of as much as 1.5 billion euros in labor prices yearly.

The inventory market virtually wrote off VW

From IG Metall’s perspective, this must be the reply to the issues VW is going through. Germany’s largest industrial firm has did not sustain with modifications on this planet. Just like the entire nation.

The inventory market virtually wrote off VW, and the share worth halved inside 5 years. From the angle of shareholders, the state of affairs is “very serious and unsatisfactory,” says Ingo Speich, head of sustainability and company governance on the fund firm Deka Investment.

“This development is a result of blatantly wrong decisions,” he criticized earlier than the collective settlement. Volkswagen’s enterprise has been a hit story for a few years. “But that’s over. Reforms were introduced far too late.”

In addition, some reforms have failed. Above all, the try to deliver Volkswagen into the digital age. Blume’s predecessor, Herbert Diess, already knew that software program would play an essential function in automobiles sooner or later. To do that, he based his personal subsidiary, Cariad, which was to develop into the “second largest software company after SAP”. The works council went alongside and ensured sturdy union group. The plan failed.

Now Blume is encouraging his managers to take a brand new path: Wolfsburg is dropping significance within the international Volkswagen Group, the vast majority of whose 670,000 workers work exterior Germany anyway.

The automotive big buys an important future expertise from two start-ups: Rivian within the USA and XPeng in China. From the CEO’s perspective, that is the quickest manner out of the software program catastrophe. Developers at residence are dropping energy; 4,000 jobs might be reduce there by 2030.

The firm’s administration wished to shut two to 3 crops in Germany with a purpose to adapt the dimensions of the corporate to the brand new actuality. It is now reducing capability for the manufacturing of round 730,000 automobiles per yr. According to the managers, VW will promote half one million fewer automobiles in Europe within the foreseeable future than in 2019. The continent’s weak financial improvement is one purpose for this, competitors from the Chinese is one other.

The sociologist Andreas Boes sees the reason for the disaster in the truth that the trade has not modified rapidly sufficient. VW and the opposite German automotive producers haven’t managed the “paradigm shift to the information economy,” says the worker on the Institute for Social Science Research in Munich. “Therefore, they are increasingly losing the market in China and are subject to competitors from China who have adapted to the new paradigm of value creation.”

Years in the past, Boes warned that new automotive producers like Tesla have been creating their merchandise with a unique “mindset”: from the consumer’s perspective, from software program to {hardware}. This reverses the processes of established producers and results in a unique kind of product – as will be seen with electrical automobiles in China. Western producers can hardly sustain available in the market.

This hits BMW, Mercedes-Benz and the Volkswagen manufacturers arduous as a result of income from China have been one of many foundations of the German financial mannequin for many years. “The central problem for German car manufacturers is that they cannot understand their failure to reorient themselves as long as they develop their strategies in the old paradigm,” says Boes.

In addition to the transformation, the group is stricken by tangible issues. “The capacity utilization of the plants must be increased significantly in order to get costs under control,” says Deka funding skilled Speich. Volkswagen should handle to “bring more attractive products to the market, increase the number of units and thus achieve higher utilization.”

Higher probability of cheaper automobiles

VW boss Blume made the mannequin vary the main target of his work originally of his time period in workplace two years in the past. However, it takes time for such modifications to develop into seen. The new automobiles for the subsequent few years have been one of many factors of the displays in Berlin.

The alternatives for brand new autos such because the reasonably priced ID1 small automotive have elevated on account of the collective settlement. Developing a brand new automotive and establishing manufacturing strains price a whole lot of tens of millions of euros. In order to have the ability to afford this, the VW model’s earnings ought to improve by 15 billion euros. Management and workers agreed on this along with the in-house tariff. The works and labor prices make up 4 billion. A foundation for the long run?

“VW must become more innovative, faster and more profitable,” says Speich. The dimension of the corporate is at present an obstacle. “It has to become an advantage again. VW still has every chance of moving forward again.” With a bit of optimism, one might additionally communicate equally about Germany as a location as an entire.

Daniel Zwick is a enterprise editor and stories on all matters associated to the automotive trade for WELT.