Matthias Rietschel/Reuters Already affected by cuts: VW plant in Zwickau
The German economy is weakening. And when the economy weakens, so will big companies. Like Volkswagen. The August figures, which were a holiday, and the downward trend that had been observed for some time, should be alarming. Last month, the Federal Motor Transport Authority registered 197,000 new cars. That’s almost 28 percent less than in the same period last year. Particularly affected are pure electric vehicles. With 27,000 new vehicles, their share was 69 percent lower than the previous year.
Suddenly, business owners and management seem to be waking up. Unpleasant measures are announced to employees. The bombshell was dropped early last week. Cuts are announced, and plant closures and job losses are not out of the question. Job security is also an issue.
IG Metall, the works council and the state are shocked. Strange as it may sound, their top representatives are sitting on the company’s supervisory board or even the executive board. Lower Saxony’s Prime Minister Stefan Weill (SPD) has loudly called for the reintroduction of bonuses for purchasing electric cars. Instead, a four-day week is being discussed. At a works meeting on Wednesday, the head of the general works council, Daniela Cavallo, declared “strong resistance” to possible plant closures and layoffs. VW is not suffering because of its location in Germany and German labor costs, but rather because “the board of directors is not doing its job.”
Volkswagen AG, however, has fewer management problems. With around 680,000 employees and annual sales of over 330 billion euros, the giant is currently struggling with a competitive environment that is largely politically driven and the conflict between the Porsche Piëch family (around 50%) and the state of Lower Saxony (20%) and the busy Qatari sheik. The state-mandated transition to a fossil-free drive system without material security began to have negative effects at the beginning of 2022 at the latest, when the federal government and parliament entered into an economic war with Russia. The resulting rise in prices for raw materials, fuel and electricity shook the export-oriented German economy to its core.
This contradiction between reality and political aspirations is further exacerbated by the low market acceptance of “alternative forces.” Noisy Handelsblatt By 2023, the number of electric vehicles registered worldwide will reach 14.8 million. At the same time, 48.8 million vehicles were registered in Germany alone. The share of new electric vehicle registrations reached 18%, but it began to fall in the same year when government support ended.
The Volkswagen board is responding to increasingly worsening margins with marketing-driven activism. The average margin in the first half of the year fell to 2.3 percent. That’s a far cry from Toyota and worse than the board’s 6.5 percent target. It’s not just Porsche and Piëch in Salzburg and Al Thanis in Qatar who want their share of the margins. Even with recently reported gross profits of nearly €18 billion, the scope for investment is also limited. Nevertheless, CEO Oliver Blume must stick to the change process. In addition to the cuts and closures, he has continued to express his unwavering loyalty to government guidelines. The guiding principle is a “group strategy” that is a mishmash of wishes that huge sums of money should continue to flow. But an escape plan is likely to form more and more in the back of his mind.
Volkswagen’s concerns are also raising alarms loudly in the mainstream media. That was the headline. Handelsblatt “Endgame for Volkswagen.” But few “high-quality media” dare to reveal the cause. On the contrary. That much mirror Economics Minister Robert Habeck (Greens), who thinks in economic terms, even declared himself a prophet. He announced in 2019: “The market.” His predictions at the time are now spreading by word of mouth, and Habeck, the Cassandra of Lübeck, certainly felt a little satisfied.
