Volkswagen's labour chief warns of mass layoffs, plant closures in Germany

LONDON (Reuters) -Volkswagen plans to shut at least three factories in Germany, lay off tens of thousands of staff and shrink its remaining plants in Europe's biggest economy as it plots a deeper-than-expected overhaul, the carmaker's works council head said on Monday.

Here are some statements and comments in reaction to the news:

VOLKSWAGEN BRAND CEO THOMAS SCHAEFER:

"We are not earning enough money with our cars currently. At the same time, our costs for energy, materials and personnel have continued to rise. This calculation cannot work in the long term.

"So we have to get to the root of the problem: we are not productive enough at our German sites and our factory costs are currently 25-50% higher than we had planned. This means that individual German plants are twice as expensive as the competition.

"In addition, we at Volkswagen (ETR:VOWG_p ) are still processing many tasks internally that the competition has already outsourced more cost effectively. This means that we cannot continue as before. We must quickly find a joint and sustainable solution for the future of our company."

GERMAN GOVERNMENT SPOKESPERSON:

“It is well known that Volkswagen is in a difficult situation. (...) The Chancellor's position on this is clear, namely that possible wrong management decisions from the past must not be at the expense of employees. It is now a matter of preserving and securing jobs."

STIFEL ANALYST DANIEL SCHWARZ:

"The plans go far beyond market expectations. I believe this reflects a unique combination of unfavourable factors: competition in China, softening of demand in Europe, especially for BEVs (battery electric vehicles), stricter regulation.

"Of course, unions will disagree with the proposed measures. However, I find encouraging that unions seems to largely agree with the analysis that VW needs to take significant action.

"I think strikes are likely: one side asks for 7% wage increase, the other side offers >10% wage cut plus factory closures.

"It will not be easy to find a compromise. It will be interesting to see whether unions will limit strikes to VW brand factories (where it might hurt VW less) or also expand this to other brands, like Porsche, where the damage would be more significant."

MATTHIAS SCHMIDT, A EUROPEAN AUTO MARKETS ANALYST:

"There is likely a lot of room for manoeuvre here. (...) Cuts are long overdue though. (Former CEO Bernd) Pischetsrieder tried to make the company more competitive two decades ago, but the unions showed him the door.

"This time cuts are more out of necessity to remain competitive rather than become more competitive, in a European market running at 2-3 millions units below pre-COVID, alongside reduced scaling benefits from its shrinking Chinese business."

MORITZ KRONENBERGER, PORTFOLIO MANAGER AT UNION INVESTMENT, WHICH OWNS SHARES IN VOLKSWAGEN:



“The tougher planned cost-cutting measures by the Volkswagen Board of Directors illustrate the challenges the group faces in the medium term. Due to the lack of volume growth in the automotive industry, the emerging competition from China and the disadvantages in Germany as a production location, the measures are clearly unavoidable.

"The unions will likely respond to potential plant closures with strikes. There is a divergence between the interests of employees and employers here, and employees will ask themselves why such drastic measures have to be taken after the record profits in 2023.”

Source: Investing.com