When Volkswagen announced yesterday a “cost-cutting restructuring plan to make the brand more competitive and sustainable in the long term,” it gave a clear idea of the nature of its austerity-driven growth model: a wave of cuts and forced layoffs in Germany. Volkswagen’s cost-cutting plans will certainly face stiff resistance from unions, which hold nearly half the seats on the company’s supervisory board, the body that appoints executives, but there are fears of a wave of layoffs of many of Germany’s 295,000 workers.
Volkswagen’s crisis: company cuts costs and closes plants in Germany
The historic Wolfsburg plant has also ended up in the crosshairs of the German car group’s management. Volkswagen management is expected to present its plans to around 18,000 workers at a town hall meeting in Wolfsburg tomorrow morning, but – according to CNBC – the car giant “could push for the closure of the Osnabruck plants in Lower Saxony and Dresden in Saxony”.
The austerity policy aimed at Germany
The Wolfsburg plant has long been experiencing the austerity policy desired by the automotive group. After canceling the project to build a new futuristic plant in the German city, the company’s top management decided in recent months to cancel production of the ID.3. For the German company, the reasons are simple: low demand for the model.
Of course, Volkswagen has chosen to concentrate the majority of its electric sedan production in the Zwickau plant, but there has been no shortage of funding abroad. In particular, towards that non-EU country that represents the bulk of the group’s revenue: China.
Investments in China
While in Germany Volkswagen has imposed a 10 billion cut plan on its employees, in the Asian giant it is doing big business. The German company has started several joint ventures in China, such as Volkswagen Anhui Automotive with the Chinese group JAC Automobile (after the historic ones with SAIC Motor and FAW), with headquarters in Hefei, in the eastern province of Anhui which, according to the intentions of the company’s top management, is destined to become “one of the group’s global competence centers for electric mobility”. Translated: it will be the largest procurement and research and development center of the Volkswagen group outside of Germany’s borders.
But not only that. The electric SUV Cupra Tavascan is born from the Volkswagen plant in Anhui. Unfortunately for the Tavascan, the Chinese passport represents a big problem. Even the electric SUV produced in the Volkswagen Anhui Automotive plant will not escape the duties that the European Union will impose on electric cars produced in China.
The golden times are coming to an end. The German brand is losing market share in China: in the first half of the year, deliveries to Chinese customers fell by 7% compared to the same period in 2023. The group’s operating profit fell by 11.4% to 10.1 billion euros. The poor sales performance in the People’s Republic is the result of a company that is favoring local electric vehicle brands, especially BYD and AION.
