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Volkswagen must solve most of its problems alone, says German minister

Germany wants to support Volkswagen and help it avoid factory closures but the ailing car giant will have to fix most of its problems itself, Economy Minister Robert Habeck said Friday.

Published: 20 September 2024 14:34 CEST

Economics Minister Robert Habeck (Greens) and Chancellor Olaf Scholz (SPD)

Economics Minister Robert Habeck (Greens) and Chancellor Olaf Scholz (SPD) sit together in the Bundestag debating chamber. Photo: picture alliance/dpa | Kay Nietfeld

Volkswagen said earlier this month it needed significant restructuring to stay competitive, and was considering shutting sites in Germany for the first time in its 87-year history.

The announcement stunned employees and added to concerns about Germany’s flagship car industry as it grapples with high costs, increased competition from China and weak demand for electric vehicles (EVs).

“The majority of the tasks will have to be solved by Volkswagen itself,” Habeck said during a visit to a VW plant in Emden in northwestern Germany.

He refused to comment on media reports that thousands of jobs could be threatened at Volkswagen, saying he “cannot interfere” in company policy.

READ ALSO: Volkswagen – are 30,000 jobs at risk of being cut in Germany?

But politicians could help the car sector by looking at ways to send the right “market signals”, Habeck said, stopping short of mentioning any possible state aid for Volkswagen.

He pointed in particular to efforts to boost demand for EVs, insisting that electric driving “is the future”.

Sales of battery cars have plummeted in Germany this year after the government phased out subsidies, dealing a blow to carmakers who have invested heavily in the transition away from fossil fuels.

Berlin recently laid out plans for new tax breaks for electric company cars to help turn the tide, Habeck noted.

The minister will on Monday host a high-level meeting with representatives from the car industry and unions to discuss the sector’s woes.

Underlining the current challenges for carmakers, Mercedes-Benz on Thursday lowered its outlook for 2024 on the back of weak sales in the key Chinese market.

German rival BMW likewise trimmed its profit guidance earlier this month, also citing muted demand in China.

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Volkswagen: Are 30,000 jobs at risk of being cut in Germany?

Up to 30,000 jobs at VW locations across Germany are at risk of being slashed, German media outlet ‘Manager Magazin’ reported on Thursday, citing sources.

There are around 120,000 staff at six plants in the German cities of Wolfsburg, Brunswick, Hanover, Salzgitter, Emden and Kassel, as well as at Volkswagen Services, Volkswagen Immobilien and digital solutions company dx.one. The company also attracts international workers.

As of 2020, 6.4 percent of Volkswagen’s workforce were foreign.

Volkswagen, which is Europe’s largest car manufacturer, has not confirmed reports on the number of job losses.

According to an article published on Friday by German broadcaster NDR, VW’s intranet released a statement to employees saying that the works council and the company “reject the alleged target of cutting 30,000 jobs”.

However, the firm did say that it needs to make savings. A company spokeswoman told German media: “One thing is clear – Volkswagen must reduce its costs at its German sites. This is the only way the brand can earn enough money to invest in the future.

“How we achieve this goal together with the employee representatives is part of the upcoming talks,” she said.

What’s happening at Volkswagen?

Volkswagen recently cancelled a job security agreement with the trade unions that had been in place since 1994. It means that jobs are now only guaranteed until the end of June 2025 compared with 2029 previously – unless another agreement is reached.

The company said that if there is a return to the collective agreement prior to January 1st, 1994 “redundancies for operational reasons cannot be ruled out”.

The firm, which cites high costs in its core brand VW Passengers Cards, also said plant closures may be on the cards. It is the first time that the company has considered closing some of its factories in its 87-year history.

READ ALSO: Will there be job losses and plant closures at Volkswagen in Germany?

What else do media reports say?

According to the media report in Manager Magazin released on Thursday, the crisis-hit car manufacturer could also cut its investment plans from €170 billion to €160 billion over the next five years.

The business outlet reported that the situation could be particularly bleak in VW’s research and development fields. According to some forecasts, 4,000 to 6,000 of the approximately 13,000 employees in Germany may face losing their jobs, the outlet stated.

According to insiders, the savings are necessary because many group divisions are lagging behind their expected revenues. The report states that the VW core brand alone is around €4 billion behind expected returns this year.

In the first half of this year, VW suffered from sluggish demand for new cars. Business has been particularly weak in China, where the VW Group sells about a third of all its cars. Sales shrank by 2.4 percent to 4.3 million vehicles.

Due to less demand for e-cars in particular, the group has also reduced production at some locations. The plants in Wolfsburg, Emden, Zwickau and at Audi in Ingolstadt and Neckarsulm have reduced capacity by a quarter and cancelled expensive night shifts.

Trades union IG Metall has vowed to fight back against cuts.

“First of all, the threat of mass layoffs and plant closures must be off the table,” IG Metall trade union spokesperson Jan Mentrup told The Local recently.

READ ALSO: German union not ruling out strikes if Volkswagen talks fail

The union has also threatened strike action. Mentrup said that “warning strikes could follow from December 1st after the end of the peace obligation”.

Negotiations, which the union hopes will result in new collective agreement, are set to begin on September 25th.

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