Employees of German carmaker Volkswagen (VW) protest at the start of a company general meeting in Wolfsburg, northern Germany, on September 4, 2024.
Moritz Frankenberg Afp | Getty Images
Management at German auto giant Volkswagen is set to clash with workers on Wednesday, as senior business leaders prepare to give details of possible cutbacks that could include the closure of a historic domestic plant.
Images brought by Getty Images show employees protesting at the city hall about potential plans for the business, waving union flags and banners with slogans that say management mistakes are not their fault and asking leaders to “finally do your job,” according to a CNBC translation.
“We have spent more money on the brand than we have earned for some time now. That is not good in the long term,” said Arno Antlitz, chief financial officer and chief operating officer of the Volkswagen Group, to employees, according to comments shared by Volkswagen.
Annual vehicle sales in Europe have fallen compared to the period before the Covid-19 pandemic and will remain lower than the baseline, Antlitz explained. He said he expected around 2 million fewer cars to be sold each year in the European market, compared to pre-pandemic times. Antlitz estimates that Volkswagen holds about a quarter of Europe’s market share, meaning the decline has resulted in a 500,000-per-year shortfall in the company’s vehicle sales, equivalent to the combined sales of the two manufacturers.
Employees of German carmaker Volkswagen (VW) hold a banner reading ‘A table tennis table without a ball is like a press plant without an engine’ as they stage a protest at the start of a company rally in Wolfsburg, northern Germany, on September 4. , 2024.
Moritz Frankenberg Afp | Getty Images
Volkswagen on Monday warned that it could not implement factory closures in its home country of Germany – a measure that was previously thought to be off the table and has never been taken into account in the company’s records.
The car company also said that the labor protection agreement, which has been in place since 1994 and protects German workers until 2029, may have to be ended.
Speculation about the closure of Volkswagen sites in Osnabrueck in Lower Saxony and Dresden in Saxony mounted on Tuesday.
“It is our joint responsibility to increase the cost efficiency of the German site in particular. We need to increase productivity and reduce costs,” said Antlitz.
“We still have a year, maybe two years, to turn things around. But we have to use this time.”
Volkswagen’s works council, which includes staff members elected to represent the interests of employees at the company, and Germany’s main industrial union IG Metall have been highly critical of the plan and have announced they will oppose it.
Employees of German car manufacturer Volkswagen (VW) wait for the start of the company’s general meeting in Wolfsburg, northern Germany, on September 4, 2024.
Moritz Frankenberg Afp | Getty Images
Daniela Cavallo, chief representative of Volkswagen’s General Works Council, said earlier this week that the group would present “fierce resistance” to the plan, according to a CNBC translation. There has been an understanding for decades that profit and job security are the same goal, but companies have now decided to end this deal, he said.
The most important thing now is to take a picture of the future and understand the direction of the business, added Cavallo.
German media also quoted him as saying he expected Wednesday’s town hall to be fully attended, and that workers voiced their frustration that day.
Philippe Houchois, head of global autos at Jefferies, told CNBC’s “Squawk Box Europe” on Friday that Volkswagen CEO Oliver Blume will try to ease resistance to potential plans.
“Blume is a different kind of predecessor. He is probably more from the inside and will see to what extent he can, to change some of the resistance to, to change in Volkswagen,” he said.
Houchois also said that Volkswagen management and employee representatives may not be going too far when it comes to the bottom line, based on comments from the past.
“It’s a question of how they are, they get an agreement or a process to actually work together, but the endgame seems to be understood on both sides,” he said.
The potential problems at Volkswagen come at a difficult time for the broader German economy and specifically for the country’s auto industry, as various challenges weigh on the sector.
On Wednesday, the Ifo agency said that the business climate in the German automotive industry retreated again in August, falling to a negative 24.7 points from a negative print of 18.5 points in the previous month. Business expectations for the coming six months are “very pessimistic,” Ifo said.
