Volkswagen is facing a far-reaching transformation: around one fifth of the business is to be sold – in order to save costs. Employee representatives announce resistance.
Friday, 08.09.2017
18:04 clock
A few days before the start of the Frankfurt Motor Show IAA Volkswagen CEO Matthias Müller makes the car world sit up and take notice: In an interview With the “Wall Street Journal” Müller explained the – still rather vague – sales plans at Europe’s largest automaker.
Volkswagen 
plans to separate divisions that, according to the Volkswagen strategists, are no longer part of their core business. The Group units available for sale account for one fifth of the Volkswagen Group’s revenue of last year’s € 217 billion, says Müller. The demand repeatedly raised by investors, from larger segments such as Volkswagen Trucks or the premium subsidiary Audi to separate, Müller missed on this occasion a damper. “We do not let anyone dictate which decisions we should make,” says Müller.
The plans are not completely new. For months, the VW board of directors have been discussing which parts or brands the group could soon solve. At the annual press conference of the Volkswagen Group in mid-March, Müller indirectly addressed potential sales and splitting plans. At that time, he said that the Group wanted to promote a “very important” topic in 2017: the realignment of component activities.
Which areas are involved?
In August, that reported manager magazin from the state of the sales plans: The long-considered sale of the motorcycle manufacturer Ducati, which formally belongs to the corporate brand Audi, is now off the table. For the plan, which would have flushed probably 1.5 billion euros in Volkswagens coffers, failed because of the resistance of the works council.
On the other hand, the future of Volkswagens truck and bus commercial vehicle division is moving: It bought in at the American truck manufacturer Navistar and at the beginning of March about 17 percent of Navistar,
At the AGM in mid-May, Müller said that the partnership was more than just an equity investment. It is also about close cooperation on core components such as engines, joint purchasing – and cooperation in areas such as autonomous driving “.
According to Board Member Andreas Renschler, who headed Daimler’s truck division for many years, this strategic alliance should bring benefits to all three truck brands of the Volkswagen Group: “We develop the engine, but we develop it for everyone. For Scania, and now for Navistar too, “he said in March manager-magazin.de,
However, there is still a lot in the commercial vehicle portfolio that VW strategists do not necessarily see as the core business of the group. This includes, for example, the construction of large engines for use in ships or power plants, as produced by the MAN unit Diesel & Turbo. Or the MAN subsidiary Renk. It manufactures about gearboxes for tracked vehicles, ships or turbines.
How does the workforce react?
The sales of these two MAN subsidiaries have been torpedoed so far by the employee representatives. “The employee bank on the supervisory board of Volkswagen will approve neither the sale of Ducati nor of Renk or MAN Diesel & Turbo,” said a spokesman for the VW Group Works Council at the end of July. On Friday, he reaffirmed this view: “Our position is well-publicized, nothing has changed and nothing will change.”
What is the Executive Board member doing?
But there is probably the last word not yet spoken. VW Chief Financial Officer Frank Witter will soon have the Supervisory Board vote on a whole package of subsidiaries and assets that the Group could sell in the next four years. A partial listing of the commercial vehicle sector should also be a possible option, such as Manager magazine reported in August,
How such an organization would be possible, makes the automaker Daimler. Stuttgart want to miss a new structure at the latest at the 2019 Annual General Meeting and convert Daimler AG into a holding company. Three parts of the company are planned: Mercedes Benz with vans, trucks and mobility services. With this structure, it would also be possible to carry out partial stock market transactions of individual divisions. One may assume that the VW leadership closely monitors Daimler’s splitting plans.
Which area is particularly sensitive?
Volkswagen plans to realign its large components business in 2017. This includes engine production at Volkswagen’s own plants, as well as the production of axles and gearboxes or seats. Numerous car manufacturers have such parts mainly produced by external suppliers. At Volkswagen, numerous components are still manufactured in our own factories.
Müller now wants to bundle the individual component factories in an independent business unit. It should, so it suggested to Müller, in the future possibly also orders from other automakers can accept. A partial sale or even complete sale, according to information from manager-magazin.de currently not provided.
Muller himself warned in March that the merger of the component factories was a “very complex in every way”. Therefore, the bundling should take place in several steps and start in Europe.
What is the problem of component manufacturing?
For VW’s component area, around 70,000 employees work at more than two dozen locations – ie around 12 percent of the total workforce of the Volkswagen Group. So far, the individual parts are usually attributed to a VW Group brand.
Audi, for example, operates an engine production facility in Györ, Hungary. In 2015, six different gasoline and five different diesel engines were produced there. Although engines for other VW makes are also being made in Györ, most of the engines are likely to end up in Audi models. According to Audi, almost the entire Audi engine range now comes from Györ.
The economically unfortunate effect: In various factories, the Volkswagen Group produces fairly similar components for the individual Group brands. By merging and standardizing parts for multiple brands, experts expect high cost savings.
Works councils were not very enthusiastic about the merger plans so far. Because the foreign component factories – for example in Hungary – also produce much cheaper because of the low wages. A merger with the German plants is likely to increase the pressure on the German locations, the employee representatives fear.