Wolfsburg, Germany (Business Emerge, September 4): Volkswagen’s finance chief, Arno Antlitz, has issued a stark warning that the automaker has “one, maybe two” years to realign its core car brand in response to declining demand and the ongoing shift toward electric vehicles. The comments came during a tense meeting with employees, where Antlitz emphasized the necessity of significant cost reductions, which may include closing some German plants.
Addressing a crowded hall of 16,000 workers, with an additional 5,000 watching via a screen outside, Antlitz outlined the challenges facing Volkswagen. He noted that Europe’s automotive market has contracted since the pandemic, leading to a deficit of approximately 500,000 vehicles, equating to the production capacity of about two plants. Despite staff resistance, marked by whistles and calls of “Auf Wiedersehen” (German for ‘goodbye’), Antlitz stressed the importance of joint efforts by management and employees to reduce expenditures to ensure the company’s survival in the evolving market.
The potential for plant closures and job losses has sparked significant unrest among Volkswagen’s workforce. Daniela Cavallo, the head of the works council, voiced strong opposition to management’s plans, accusing them of severely damaging employee trust. Cavallo compared the looming threat of plant shutdowns to a “declaration of bankruptcy” and questioned the company’s decision to prioritize a 5-billion-euro software deal with U.S. start-up Rivian over safeguarding German jobs. She also called on CEO Oliver Blume to directly address the concerns of the employees, despite him not being scheduled to speak.
Adding to the uncertainty, Germany’s Labour Minister Hubertus Heil offered assurances of support but did not provide specifics on how the government might assist. He emphasized that it is Volkswagen’s responsibility to first take action to protect jobs and avoid the closure of its manufacturing sites. Meanwhile, the German government is expected to announce tax relief measures aimed at boosting demand for electric vehicles, which have not met initial expectations.
The difficult situation is further highlighted by recent data from the Ifo economic institute, which reported a continued decline in business confidence within Germany’s automotive sector in August. Volkswagen, which also owns brands like Audi, SEAT, and Skoda, announced earlier this week that it is considering shutting down plants in Germany and potentially ending a longstanding job security guarantee at six of its factories. This move is part of a broader strategy to intensify a 10 billion euro ($11 billion) cost-cutting initiative, with the goal of achieving a 6.5% profit margin for the VW brand by 2026, up from the current 2.3% recorded in the first half of this year.