It costs 20% more to manufacture than its competitors and it has too many workers

There are companies that announce their crises with a solemn statement. Volkswagen has chosen a different path: an internal interview with its CEO posted on its intranet, which ends being filtered to the German newspaper Der Spiegel. This is how half of Europe has learned that the largest car manufacturer on the continent still cannot find a way out of a crisis that threatens the dismissal of up to 100,000 employees and with the closure of factories.

Oliver Blume, CEO of Volkswagen, published an interview aimed at offering some more information to the workforce while the board of directors decides the strategic plan that will define the future of the company. According to his words, the result is a plan that can change Volkswagen forever.

A message for yours. Blume had been avoiding going into details for weeks about the extent of the cuts that Volkswagen was considering applying to stay afloat, while several workers protested outside its plants. In his interview published on the company’s internal network, Blume acknowledged that the costs of administration and support of the main business continue 20% above of what their rivals manage.

This percentage conditions Volkswagen’s line of action: reduce the size of the company and, according to Blume, this involves laying off workers. The million dollar question is how many will have to be fired. “A theoretical derivation without a change in labor costs would give an adjustment of 50,000 jobs worldwide,” said its CEO in the leaked interview.

To these would be added the 50,000 already agreed with the unions for Germany until 2030. The round sum is the 100,000 jobs that already resonate in the hallways of the entire company.

The factories in the pillory. Blume also broke his silence on the future of the four German plants that They have been in the air for months. “The truth is also that, as of today, we still cannot confirm a competitive occupation for the Emden, Hannover, Zwickau and Neckarsulm plants,” lamented the company’s CEO.

The reason is that Volkswagen has an oversized structure. The group’s European plants have the capacity to assemble 500,000 more cars than the market is asking for right now. This forces Volkswagen not only to reduce its production capacity to save costs, but also to cut its car catalog to make the assembly lines more efficient and, thereby, also reduce the number of factories.

That plan could also affect Volkswagen’s factories in Martorell and Navarra, although the greatest impact of the cut is expected in its infrastructure in Germany.

Volkswagen’s military path. As an alternative to closure, Blume talks about changing the use of the factories, and dedicating them to weapons manufacturing. Something similar to what it already happens in Osnabrück, where Volkswagen is negotiating with the Israeli company Rafael to manufacture anti-missile systems.

However, geopolitical interests have blocked these negotiations. Qatar is a major shareholder of Volkswagen with two seats on its board of directors, and does not welcome the company manufacturing weapons that can destabilize the delicate balance of the Middle East.

The weight of the “people”. On the other hand, the company is not a typical car manufacturer. The government of Lower Saxony has a very important weight on its board of directors, which makes it difficult for initiatives that are especially harmful to workers to prosper. Which guarantees that the sacrifices will not fall only on the side of the squad. In fact, the State of Lower Saxony nay of the dismissal of a sixth of its staff by twelve votes to seven.

Lower Saxony controls 20% of the capital and usually rows alongside unions to protect employment in its territory. “The German automobile industry is the core area of ​​our German economy,” declared Christiane Benner president of the IG Metall union.

An opportunity for China. Before the sales drums, some analysts They have set their sights on China due to the possibility of a brand signing an agreement with Volkswagen to take advantage of the company’s infrastructure to manufacture in Europe.

The economist Moritz Schularick, president of the Kiel Institute of World Economywent a little further and predicted that the German auto giant “will likely be acquired by a Chinese manufacturer like BYD.” Given the institutional presence in Volkswagen’s shareholding, it is difficult for a total sale to occur. In any case, none of these options have been confirmed by Volkswagen’s management leadership and remain in the speculative realm.

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Image | Volkswagen