The barely concealed conflicts between the many competing forces acting on the Volkswagen Group – from management, investors and the Porsche/Piëch controlling families to the unions and the German state – have moved centre stage after the automotive giant signalled it urgently needed to cut costs in order to compete in a new era.
The VW Group is considering shutting two German plants as part of a plan to become fitter in the face of increased competition from new players, including those from China.
"The pie has become smaller, and we have more guests at the table," VW Group CEO Oliver Blume told German newspaper Bild am Sonntag at the weekend.
The announcement has sparked fury among the automotive unions, who are deeply embedded within the VW Group. “The management board has failed. The result is an attack on our jobs, sites and collective agreements,” Daniela Cavallo, chairwoman of the General Works Council said in an interview with the IG Metall union last week. She vowed to fight them: “With us, there will be no site closures.”
Cavallo sits on the VW Group’s powerful supervisory board and is widely credited with orchestrating the ousting of Blume’s predecessor, Herbert Diess.
Blume was seen as a moderating force, able to unite the company’s business goals with those of its workforce, but now he too finds himself at odds with the unions.
The Volkswagen Group is the world’s second largest vehicle manufacturer, after Toyota, but it is trying to 'right-size' to adjust to a smaller market. “We are short of around 500,000 car sales a year, the equivalent of around two plants,” group head of finance Arno Antliz said in a speech to staff at VW’s Wolfsburg headquarters last week. “That has nothing to do with our products or poor sales performance. The market is simply no longer there."
Overcapacity is a problem affecting most car makers building in Europe after regional sales failed to return to pre-Covid levels. VW estimates that two million sales have been lost across Europe, with little chance of them returning.
However, such is the economic importance of the car industry in Europe that any car maker wanting to close plants to adjust to the new reality risks unleashing a political hurricane, particularly if, like the VW Group, a portion of the company is state-owned. Dresden and Osnabrück are two assembly plants that VW is reportedly considering for closure.
The unions argue that shrinking VW Group sales are nothing to do with wider market decline but instead rest with management. “Many wrong decisions have been made in recent years. This is now coming back to haunt us,” Cavallo said. She cited Diess’s decision not to invest in hybrid technology. “[He] thought hybrids were a niche market that would quickly become obsolete. The opposite is now the case – and we are largely left empty-handed.”
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