The tightened austerity measures by Germany’s largest car manufacturer, Volkswagen, are making waves in politics. CDU leader Friedrich Merz sees him as a symbol of how poorly the German economy fares in international comparison. “Germany is no longer competitive enough,” he criticized at a CDU event in Osnabrück. The company may have made a mistake by focusing on electromobility. But other parts of the industry are no longer competitive, Merz continued. The reason is the political framework conditions. VW has been declared a “restructuring case” by the board. “This now finally shows this federal government where we stand. This is not an economic question of the world market.” Green Party politician Detzer: “Absurd debates” The Volkswagen Group had previously announced that plant closures and operational layoffs were no longer ruled out for the core VW brand. Federal Economics Minister Robert Habeck (Greens) initially did not comment on VW and Merz’s criticism. The Greens’ economic policy spokeswoman, Sandra Detzer, countered: “What harms the company and its employees are absurd debates like those initiated by CDU chairman Merz with his advice on moving away from electromobility and the claim that VW is a restructuring case,” Detzer told the F.A.Z. “A company that made a profit of around 22 billion euros last year is not a case of restructuring.” VW has relied heavily on the sales market in China in the past. In addition, the drive transition and digitalization are a double challenge. It is now important to “set up VW for the future.” Lower Saxony’s Prime Minister Stephan Weil (SPD) has already set conditions for how this should happen. In principle, the Lower Saxony state government supports the board’s course, he said. The “how” of the savings must now be discussed. “We expect that the question of closing locations simply does not arise due to the successful use of alternatives.”VW is struggling with the low demand for electric cars. Weil’s word has weight: a fifth of the voting rights at VW belong to the state of Lower Saxony, In addition, the supervisory board has extensive co-determination rights. The SPD’s economic policy spokesman, Bernd Westphal, took a similar position to Weil: “Factory closures and job cuts are not a convincing strategy,” he said. “VW has earned very well in Germany for decades.” The company must now become competitive again “through technological leadership, quality and affordable products.” On the one hand, Volkswagen is struggling with the low demand for electric cars in Germany. Plants like the one in Zwickau, which specializes in electric cars, are therefore underutilized. Chinese providers such as BYD are also increasingly entering the European market. The EU Commission is trying to slow this down with tariffs, but BYD is already planning plants in the EU. At the same time, there is less demand for cars from German manufacturers in China. In the country, the car industry has so far made around a third of its sales and presumably an even higher share of its profits. VW CEO Oliver Blume justified the tightened austerity measures with the “very demanding and serious situation” and referred to the new providers. “In addition, Germany in particular is falling further behind in terms of competitiveness. “We as a company now have to act consistently in this environment,” said Blume. Around 5 billion euros are still missing from the savings target. The VW brand’s previous “performance program” is obviously no longer enough for the board of directors. According to this plan, the core brand alone should save around 10 billion euros by 2026. The goal is to increase the return to 6.5 percent. Most recently, VW only managed 2.3 percent. Around 5 billion euros are still missing from the savings target. Volkswagen is struggling with costs that are well above the industry average. Other mass manufacturers such as the Stellantis Group with its Opel, Peugeot and Citroën brands are in a much better position. Because the previously planned job cuts through partial retirement and severance payments are no longer sufficient for the VW board, the agreement concluded with the works council to secure employment is to be terminated. It ruled out compulsory layoffs for the almost 120,000 employees in Germany until 2029. Factory closures are no longer taboo. IG Metall and the works council immediately announced massive resistance. “With me there will be no VW site closures,” said works council leader Daniela Cavallo. Lower Saxony’s IG Metall district manager Thorsten Gröger spoke of an “irresponsible plan” that “shakes the foundations of Volkswagen.” More on the subject VW has not yet said how many jobs could be lost in Germany. Nothing is known yet about possible location closures. The last such event was more than three decades ago: in 1988, a factory in Westmoreland in the USA was closed. In Germany, in addition to the main plant in Wolfsburg, VW has factories in Hanover, Emden, Osnabrück, Braunschweig, Salzgitter, Kassel, Zwickau, Dresden and Chemnitz. The subsidiary Audi recently put its factory in Brussels to the test. The fact that Habeck abruptly canceled the purchase bonuses for electric cars after the Federal Constitutional Court’s ruling on the debt brake was met with a lot of criticism in the auto industry. In the growth initiative presented at the beginning of July, the traffic light has now included a special depreciation for “zero-emission vehicles” in order to stimulate the market. The simplified taxation of company cars should be possible up to a list price of 95,000 euros. German manufacturers have long focused on high-priced premium models. VW doesn’t want to offer an electric car for less than 25,000 euros until 2026.
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