Volkswagen AG defended plans to consider unprecedented plant closures in Germany, saying falling car sales left the company with two plants, according to Bloomberg.
Demand in Europe hasn’t recovered from the pandemic and vehicle deliveries in the region across the industry are about 2 million below peak, Chief Financial Officer Arno Antlitz said at an employee meeting in Wolfsburg.
According to prepared remarks, Volkswagen lost sales by about “500,000 cars, the equivalent of around two plants.”
We need to increase productivity and reduce costs.
Europe’s biggest carmaker announced this week that it was considering whether to close plants in Germany for the first time and terminate job security agreements after years of ignoring overcapacity and falling competitiveness. The move triggers a clash with powerful labour unions as the country’s most important industry fights for its future.
VW’s main target is its eponymous passenger car brand, whose profit margins are shrinking amid an uncertain shift to electric vehicles and slowing consumer spending. Automakers in Europe are also struggling to compete with Tesla Inc. and new players from China.
Coping with reduced demand
VW employees received the support of German Labour Minister Hubertus Heil. He urged company executives to keep plants open, avoid layoffs and find “sensible” ways forward in negotiations with unions.
Daniela Cavallo, VW’s chief employee representative and member of the supervisory board, said at the same meeting that she would fight any plant closures.
Volkswagen isn’t ailing because of its German sites and German personnel costs. Volkswagen’s problem is that the board of management is not doing its job.
Volkswagen shares were down 1.6 per cent as of 4:11 p.m. in Frankfurt. The stock is down about 15 per cent this year.
Europe is at the centre of a global slowdown in the shift to electric vehicles after a number of countries including Germany and Sweden reduced or cancelled incentives. Manufacturers including VW, Stellantis NV, and Renault SA are operating plants at levels that analysts consider unprofitable, according to Just Auto.
Volvo Car AB abandoned electrification on Wednesday, dropping a plan to sell only all-electric vehicles by the end of this decade amid disappointing demand. Volkswagen last year produced about 9 million vehicles at a total capacity of 14 million. It became harder to boost profits at VW’s core brand due to rising logistics, energy, and labour costs.
Antlitz said the companies must work together to make the eponymous brand competitive again and ensure it could offer high-quality vehicles at affordable prices.
We still have a year, maybe two years, to turn things around. But we have to make use of this time.
