Car City Wolfsburg
The VW Group lags behind in the production of classic combustion models compared to the competition.
(Photo: Polaris / laif)
Wolfsburg, FrankfurtBernd Osterloh is at the balance sheet press conference from Volkswagen physically not present. Actually, such events are about the numbers – not the works council. And yet Osterloh is the central theme – also for the CEO Herbert dies,
“Osterloh is sometimes difficult to judge because he often acts emotionally and spontaneously,” says Diess on an open stage about his main counterparty, the powerful Wolfsburg works council chairman, And he immediately sends a word of praise to the sentence: “He thinks very entrepreneurially,” continues Diess. Osterloh benefits from the experience he has gained in the company over the past 30 years.
Smoldering for weeks the conflict between the board and the works council about job cuts and more efficiency. Now he takes the next turn. Chief Executive Diess agrees conciliatory tones towards the workers’ bank. Similar things can be heard from works council circles, even there nobody is interested in a new confrontation.
After all, there was a first top meeting on Monday. Diess and Osterloh had come together, accompanied by other board members and works councils. Both sides did not want to comment on the details of the round. It was about leading a “constructive dialogue”, it said from negotiating circles.
The Volkswagen Group is facing a fundamental change. In the coming years, the Wolfsburg car company will increase the proportion of electric vehicles massively. By the middle of the next decade, a quarter of all cars produced will be equipped with an electric motor.
Standstill instead of change: Power struggle at VW – A global corporation blocks itself
That goes hand in hand with fewer staff. In the industry, the rule of thumb is that electric cars can be produced with 30 percent less effort compared to conventional gasoline and diesel models.
Volkswagen will not be able to avoid a reduction in staff just because of the switch to electric mobility. At the same time, however, the Group is lagging behind in the production of classic combustion models compared to its competitors in terms of productivity and efficiency.
CEO Herbert Diess, the change is not fast enough. He claims that the workers’ side blocks crucial changes. Bernd Osterloh argues that serious mistakes have mostly been made by the management.
One of these mistakes happened last year when switching to the new WLTP emission standards, which is now also confessed to CEO Diess. “WLTP we have not done optimally,” said the CEO on Tuesday at the annual press conference in Wolfsburg. The preparation had not voted that the organization had not been rebuilt in time.
One billion for WLTP conversion
VW paid dearly for it. More than a billion euros have devoured the WLTP errors, according to CFO Frank Witter. Hundreds of thousands of cars could not be produced because they did not have the new WLTP approval. On the other hand, vehicles had to be prefabricated: the pictures are unforgettable, as Volkswagen had to rent parking spaces at the planned Berlin airport to park cars there.
The annual balance sheet for 2018 clearly shows the WLTP problems. Almost all of the Group’s passenger car brands have been affected by the failed changeover. With the exception of Seat, the operating return of all Group subsidiaries has fallen in the past year. Most visible is this effect Audi, Skoda and Porsche.
The VW brand has even missed its return target. The strong China business and the financial services provided a balance – at Group level, Volkswagen reached in 2018 about the earnings and yield levels of the previous year.
The Volkswagen brand achieved an operating profit of 3.2 billion euros last year, 100 million fewer than in 2017. The operating return fell from 4.2 to 3.8 percent. The brand has clearly missed its own targets: Original target was a margin between four and five percent for 2018.
at Audi the operating result fell from 5.1 to 4.7 billion euros. As a result, the return fell from 8.5 to 7.9 percent. Audi suffers from the WLTP problems to this day. The Ingolstadt-based premium subsidiary still lacks cars in the model range because the WLTP test procedures could not be completed on time. On Tuesday, CEO Herbert Diess promised that the gaps in the Audi model program should be closed at the latest in the spring.
The Czech subsidiary also has problems with WLTP Skoda loaded. In recent years, Skoda was the climber among the Group brands at Volkswagen, the return had risen to 9.7 percent. In 2018, the operating result fell again for the first time – from 1.6 to 1.4 billion euros. As a result, the operating return fell from 9.7% to 8.0%.
New production target for electric cars
at Porsche Revenues rose significantly faster than profit (sales: plus 9.2 percent to 23.7 billion euros, operating income: plus 2.7 percent to 4.1 billion). The rate of return has dropped significantly from 18.5 to 17.4 percent. Seat was able to increase its operating income from 191 to 254 million euros, the return climbed from 1.9 to 2.5 percent. With 530,000 cars produced Seat is very small and falls throughout the group not very strong in weight.
CEO Diess promised that the group had learned from the mistakes around WLTP – and will do much better in the future, even with the switch to electric cars, which is just as associated with major changes. Complete plants, such as those in Zwickau, Emden and Hanover, are being converted to the production of electric cars.
Volkswagen annual balance sheet: WLTP problems push down the VW yield
A new production target is intended to underpin the optimism regarding electric mobility. In the next ten years, the group will bring a total of 70 purely battery-powered electric vehicles on the market, so far, 50 were planned. This also increases the number of e-vehicles that the Group intends to produce in the next decade: it is increasing from 15 to 22 million units.
VW wants to make the entire production process climate-neutral and initiate a so-called “decarbonisation process”. By 2050, the group should become carbon neutral. “Volkswagen takes responsibility for the big issues of the future – especially in climate protection,” says CEO Diess. The group is making its contribution to limiting global warming.
Anger in the Hannover plant
But switching to electric cars causes internal trouble. At the same time as the balance sheet template in Wolfsburg, the employees at the Hannover plant came together for a works meeting. At the location of the VW bus is built in several variants.
The “Bulli” is indeed a model of success, however, the production is no longer profitable in some parts. The factory is therefore facing a radical change, ultimately, especially e-vehicles are to be manufactured. Around 3000 jobs will be available there in the medium term.
The works council has accepted the plans for the reorganization of Hanover last November. Confidence in the leadership of the company’s chief executive However, this was shaken when the planned production of the latest “Bullis” was blown off exclusively with electric drive. This happened at the end of January – and therefore sentiment turned against the Group’s Board of Management.
Accordingly sharp was the wind, the commercial vehicle boss Thomas Sedran and personnel board Gunnar Kilian countered. Over four hours, the two of the workforce in Hanover had to answer questions, as reported. After all, they could smooth the waves.
Their commitment: There is no planned additional job cuts and the management will seek new models that could be built in Hannover. It is conceivable, for example, the production of additional “Bullis” with a hybrid drive.
Theme: Volkswagen
In Wolfsburg at the balance sheet press conference Herbert Diess promised that there will be no redundancies. The unavoidable downsizing of the VW Group wants to achieve socially acceptable and above all through partial retirement and early retirement.
That was probably a point that the workers wanted to hear. As supplementary to it from works council circles, concrete negotiation rounds would begin soon. Volkswagen needs a plan how the work in the group with the change to electric mobility will be distributed in the future.
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