An
‘earthquake’ at Volkswagen – and a crisis for Germany?
The company
is seen as crucial not just to local but national wellbeing – and never before
have its workers been threatened in their own homeland like this
Kate
Connolly
Sat 7 Sep
2024 06.00 CEST
‘Earthquake
at Volkswagen” ran the stark headline in the Wolfsburger Nachrichten, the
newspaper serving the north German city that is synonymous with the carmaker.
The news
that the crisis-stricken company was weighing up the closure of factories in
Germany for the first time in its history, and prematurely dissolving its
30-year-old employment protection agreement as part of an attempt to save
around €10bn (£8.4bn), had barely filtered through to the workers emerging from
Gate 17 at VW’s main factory in Wolfsburg on Monday, where a lone reporter had
been dispatched to capture reaction at shift’s end.
But they did
not express surprise. “The mood has been in the doldrums for some time,” one
said. Another spoke of an unusually “high rate of sickness” among workers, who
were stressed by the sense of doom looming over the company – and by the mood
of uncertainty, evident most recently in cancelled shift work. “We surely knew
something was cooking,” said another.
Two days
later, company executives and an estimated 15,000 workers – 10,000 who had
packed into a large hall at the Wolfsburg plant, the rest, who couldn’t squeeze
in, watching on screens outside – faced each other in a tense showdown.
Workers
unleashed their collective anger, unfurling banners and chanting protest
slogans, among them: “We’re Volkswagen, you are not.” For about 20 minutes,
according to eyewitnesses (media were excluded from the hall), the din from the
chants and whistles prevented the bosses from speaking. Instead, they stayed
behind a long table, stony-faced, looking a little embarrassed. Dressed in
open-necked white shirts and dark jackets, their summer tans appeared to have
faded in the bright lights and the frosty atmosphere.
“We are
short of around 500,000 car sales a year,” VW’s financial chief, Arno Antlitz,
reportedly told the hall. That, he said, was the equivalent of production from
two factories. “It’s not to do with our product or poor performance. The market
is simply not there any more.” He gave the company “one or two years” to turn
the situation around. Experts estimate that VW has about 20,000 employees too
many.
Oliver
Blume, chief executive of Volkswagen Group, might have been a father addressing
his family at the dinner table as he told the employees in no uncertain terms
that the company had been living beyond its means – drawing an estimated annual
€1.5bn from its cashflow for around 15 years – and that things would have to
change. He compared the situation to a “family kitty” which “by month’s end is
empty”.
Sometimes
there is a kindly relative who will step in to pay for extras, such as a new
television, he said, before bluntly pointing out that China had in effect been
playing that role for years, with sales in the country bankrolling the company.
Blume – a
local boy who fully understands the extent to which VW underpins the economy,
and by extension the identity, of the state of Lower Saxony – at one point
appeared to let his mask slip, displaying his emotions and talking of his wish
to “protect the VW family”.
In a sign of
the passion which is likely to shape the battle that is to follow, Daniela
Cavallo, head of the works council representing the company’s 120,000 employees
in Germany, retorted: “We are the VW family, and a family leaves no one
behind.” She has promised “bitter resistance” to the company’s austerity
mandate, insisting: “We will not tolerate being liquidated.” Strikes – a rare
occurrence in the company’s history – cannot be ruled out.
What is at
stake for the 87-year-old company – founded under the direction of the Nazi
government and propelled by the dream of producing a budget “people’s car” or
“Volkswagen” – is not just Wolfsburg, or Lower Saxony, or the six other
locations across Germany, from Emden to Zwickau, where VW is deeply
established. “A crisis at VW … is a crisis for Germany,” Cavallo said.
The last big
setback VW faced – the so-called dieselgate scandal in 2015-16, when the
manufacturer was found to have falsified emissions tests that made its vehicles
appear more climate-friendly than they were – cost it an estimated €30bn in
compensation payments worldwide, as well as taking an untold toll on its
reputation as a symbol of German technical prowess and reliability.
The loss
back then in tax revenue to local communities illustrated the extent to which
VW’s influence stretches across Germany, and what a potential reduction of its
industrial strength could mean.
“Our factory
locations are the drivers of whole regions,” Cavallo said. The loss of local
business taxes as a result of dieselgate had had a detrimental effect on the
everyday life of millions, she added. It had cut deeply into municipalities’
coffers, leading to street lighting being switched off in one locality, an
explosion in the cost of burials in another, and one town “even having to
discontinue its rat control services”.
As
opposition parties in the Bundestag seized on the fallout last week, seeking to
present it as a symptom of far deeper and more widespread problems in the
German economy, Gitta Connemann, a leading member of the opposition CDU’s
pro-business wing, stressed the potential knock-on effects for the entire
economy.
“VW coughs,
and Germany goes down with the flu,” she declared, calling on Olaf Scholz’s
government to intervene.
“The car
industry remains the most important sector in Germany and in this branch, VW is
the alpha male. When the giant wobbles, then everything wobbles,” Carsten
Brzeski, head economist at the Dutch global financial institution ING, told
German media. He pointed out that Volkswagen was more important to Europe’s
economic powerhouse “than all the foreign trade with Greece”.
Some blame
the government for the company’s predicament, saying it has pushed a green
agenda which has led to a slump in domestic car sales and a rise in energy
prices, and that it has failed to deliver on promises to slashing bureaucracy,
as well as removing an incentive to buy electric cars by abruptly halting a
subsidy programme at the end of last year.
Internally,
though, there is also much criticism: in particular of VW’s own failure, over
years, to grasp the opportunities presented by electric cars or the hybrid
market. Why has it, of all companies – unlike its Chinese rivals – been so late
in producing an entry-level model, affordable for the masses, similar to its
roaring success, the VW Beetle? This is just one of many “mistakes of
management” witheringly listed by Cavallo, who suggests the company has long
since lost its common touch. As one commentator said last week: “It is as if
the ‘Volk’ has gone out of Volkswagen.”
Yet the
reality is that in Europe 2.5m fewer cars are being produced now than five
years ago. The market for electric cars slumped by 69% in August compared with
a year earlier, believed to be as a result of waning consumer confidence, and
every fifth electric vehicle sold in Europe is produced in China. An affordable
entry-level VW electric car, which is in the pipeline and due to go on sale
next year, is being produced not in Germany but on the Iberian peninsula.
“From a
purely economic point of view, there are ever fewer arguments in favour of
producing in Germany,” said Helena Wisbert from the Centre for Automotive
Research in Duisburg.
Back on the
floor of Hall 11 in Wolfsburg on Wednesday, a representative of VW’s hitherto
prestigious apprenticeship programme – long the envy of many other companies,
and countries – expressed her own concern over the lack of Zukunftssicherheit
(“future security” or sense of responsibility towards the younger generation).
She accused the company of misleading new recruits over the prospect of cuts to
VW’s guaranteed annual 1,000 training places.
“I don’t
recognise this company any more,” Gianna Leo of GJAV, an organisation
representing youth training schemes, told the hall. “This is no longer the same
VW where I started my working life.” Her words were met with cheers and a
standing ovation from workers, and a renewed wave of boos and whistles in the
direction of the executives.
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