Withering under the sustained assault of misguided EU government mandates to Electrify and unable to compete with the onslaught of subsidised cheap Chinese EV’s Volkswagen are in real danger of going out of business in the near future.
Oliver Blume the current Chief of the venerable car giant is acutely aware that the German based manufacturer is at a distinct competitive disadvantage and is trying to reduce and curtail costs wherever possible.
For the first time ever, VW may take the drastic step of factory closure in Germany to try and reduce costs in an attempt to confront the “demanding and serious situation” that could destroy European based car manufacturers.
Across the developed world the cost of labour makes manufacturing of any item more expensive than in those where the Labour Unions aren’t strong, cost of living is high and environmental laws are not really enforced.
Volkswagen has an added problem. About 100,000 of its employees are based in the German State of Lower Saxony which also holds a 20% stake in the company and then there is governance structure which gives significant power to the workers.
Historically this has meant that time lost to labour disputes was minimal, it was not in the interest of anyone involved to disrupt production, and thus costs were competitive. The Union has vowed to fight any factory closures which probably means strike action which of course will harm the brand at a time when it least needs it.
The company has invested heavily to transform themselves into an EV powerhouse, but the public has not been that enthusiastic and as a result of lack of demand they have had to moth-ball some of their factories and abandon plans to open new ones.
VW are still the king of the hill in China for their ICE powered cars but the market is shrinking fast and they are in seventh place when it comes to EVs and lets us not forget that 50% of car sales in China are EVs now.
Cutting costs has become the mantra of Oliver Blume and the Lower Saxony Government. To do this they are sort of abandoning the development of their software that powers the new EVs. A recent investment of USD5billion in the (sort-of) failed American EV start-up Rivian and a partnership with Chinese Xpeng is aimed at short cutting the development and driving down costs, and of course most of these jobs will not be in traditional manufacturing activities.
Trouble is all of this may be a mere band-aid for the troubled car giant. Mr. Antlitz, the groups CFO told workers and investors alike back in September that they have perhaps two years to get it right. But the new Xpeng EVs will not be on the market until sometime in 2026 by which time the quicker Chinese manufacturers may be a lot further down the road than Volkswagen.
