By AFP
September 24, 2024
Volkswagen CEO Oliver Blume is aiming for a package of measures to shore up the carmaker - Copyright AFP Tobias SCHWARZ
Léa PERNELLE
Volkswagen managers and workers representatives will start crunch talks in Hanover on Wednesday, following the German group’s announcement that drastic cost-cutting measures are needed to keep the carmaker competitive.
Two homegrown figures who have spent their entire careers at Volkswagen — group CEO Oliver Blume and head of the works council Daniela Cavallo — will face off at the meeting.
Blume wants to seal a “package” of measures this year to shore up the carmaker, which has struggled with weak demand and a difficult transition to electric vehicles.
Cavallo has promised “bitter resistance” to the plans that include the possible closure of production sites in Germany — an unprecedented step in the 87-year history of Volkswagen.
– The boss –
A mechanical engineer by training, Blume plotted his career through the different brands — Audi, Seat and then VW — before becoming CEO of Porsche in 2015.
The mild-mannered manager, 56, was tapped by the family dynasty behind Volkswagen to become head of the group in 2022, replacing controversial figure Herbert Diess.
A consensus-builder by reputation, Blume was seen as a breath of fresh air after Diess had rubbed shareholders and unions the wrong way with provocative statements.
So it was all the more surprising when Volkswagen announced this month that it could cut thousands of jobs by closing factories in Germany.
The shock proposal alarmed unions and the government but Blume has said drastic action was necessary to take on the “major challenges” faced by the carmaker.
In his short time as CEO, Blume has already sought to cure Volkswagen’s ills, scrapping Diess’s policy of doing everything in-house and striking new partnerships.
The German giant has made investments in Chinese manufacturer XPeng and US outfit Rivian to work on in-car technology, although the new projects will take time to pay off.
– The union leader –
Like Blume, Cavallo was born close to Volkswagen’s headquarters in the central German city of Wolfsburg and has never strayed far from the group.
Her father emigrated to Wolfsburg from Italy to take up a job at Volkswagen along with thousands of other so-called guest workers.
Cavallo, the first woman to lead Volkswagen’s works council, began an apprenticeship at the carmaker out of high school.
In 2002, she was elected to represent workers at the VW subsidiary Auto 5000, working her way up to the head of the general works council in 2021.
“My job is not to understand technology down to the last detail, but to advocate for people’s interests,” Cavallo told Die Zeit newspaper after being criticised for not having spent sufficient time on the factory line.
Cavallo is “very clear on what she wants for employees”, said car market expert Stefan Bratzel, who warned that management should not “underestimate” the 49-year-old.
She reportedly gets along with Blume better than she did with Diess.
There was a slim chance that the two Volkswagen lifers could figure something out “in partnership”, said Bratzel.
High costs, slowing China: VW’s perilous road ahead
By AFP
September 24, 2024
Volkswagen employees protested at the start of a automaker's general meeting last week after it said earlier in the week it could take the unprecedented step of closing production sites in Germany - Copyright AFP/File JUSTIN TALLIS
Volkswagen managers and workers representatives will start crunch talks in Hanover on Wednesday, following the German group’s announcement that drastic cost-cutting measures are needed to keep the carmaker competitive.
Two homegrown figures who have spent their entire careers at Volkswagen — group CEO Oliver Blume and head of the works council Daniela Cavallo — will face off at the meeting.
Blume wants to seal a “package” of measures this year to shore up the carmaker, which has struggled with weak demand and a difficult transition to electric vehicles.
Cavallo has promised “bitter resistance” to the plans that include the possible closure of production sites in Germany — an unprecedented step in the 87-year history of Volkswagen.
– The boss –
A mechanical engineer by training, Blume plotted his career through the different brands — Audi, Seat and then VW — before becoming CEO of Porsche in 2015.
The mild-mannered manager, 56, was tapped by the family dynasty behind Volkswagen to become head of the group in 2022, replacing controversial figure Herbert Diess.
A consensus-builder by reputation, Blume was seen as a breath of fresh air after Diess had rubbed shareholders and unions the wrong way with provocative statements.
So it was all the more surprising when Volkswagen announced this month that it could cut thousands of jobs by closing factories in Germany.
The shock proposal alarmed unions and the government but Blume has said drastic action was necessary to take on the “major challenges” faced by the carmaker.
In his short time as CEO, Blume has already sought to cure Volkswagen’s ills, scrapping Diess’s policy of doing everything in-house and striking new partnerships.
The German giant has made investments in Chinese manufacturer XPeng and US outfit Rivian to work on in-car technology, although the new projects will take time to pay off.
– The union leader –
Like Blume, Cavallo was born close to Volkswagen’s headquarters in the central German city of Wolfsburg and has never strayed far from the group.
Her father emigrated to Wolfsburg from Italy to take up a job at Volkswagen along with thousands of other so-called guest workers.
Cavallo, the first woman to lead Volkswagen’s works council, began an apprenticeship at the carmaker out of high school.
In 2002, she was elected to represent workers at the VW subsidiary Auto 5000, working her way up to the head of the general works council in 2021.
“My job is not to understand technology down to the last detail, but to advocate for people’s interests,” Cavallo told Die Zeit newspaper after being criticised for not having spent sufficient time on the factory line.
Cavallo is “very clear on what she wants for employees”, said car market expert Stefan Bratzel, who warned that management should not “underestimate” the 49-year-old.
She reportedly gets along with Blume better than she did with Diess.
There was a slim chance that the two Volkswagen lifers could figure something out “in partnership”, said Bratzel.
High costs, slowing China: VW’s perilous road ahead
By AFP
September 24, 2024
Volkswagen employees protested at the start of a automaker's general meeting last week after it said earlier in the week it could take the unprecedented step of closing production sites in Germany - Copyright AFP/File JUSTIN TALLIS
Sam Reeves, Jean-Philippe Lacour
After Volkswagen’s bombshell announcement earlier this month that it could close factories in Germany for the first time, company management and unions will begin tense talks on a new pay deal Wednesday.
Here are some of the key challenges facing Europe’s biggest car maker:
– High costs –
Volkswagen has repeatedly stressed that its costs are excessive and profit margins too low, particularly at its core VW brand.
Production costs in Germany are “clearly too high”, said a leaflet from VW’s management distributed to the workforce at several sites in the country ahead of the talks.
“We have to increase our productivity. We have to reduce our labour costs.”
All areas would be examined — from development, to manufacturing and distribution — when it comes to cost-cutting, VW group CEO Oliver Blume told public broadcaster ZDF in an interview this week.
High electricity prices, which have risen since the energy crisis triggered by the Ukraine war, as well as elevated labour costs are a significant challenge for the 10-brand group in its home market.
Stefan Bratzel, a German automotive expert, told AFP that VW needs to become “much leaner”, as the company has “too many employees who don’t work hard enough and too many committees”.
Last year the flagship brand sold 2.52 million vehicles with 200,000 employees worldwide, including 120,000 in Germany.
In contrast, Japanese rival Toyota produced almost four times as many vehicles, 9.5 million, with barely twice as many employees.
– China challenge –
Volkswagen — whose brands range from Skoda and Seat to Porsche and Audi — makes around a third of its sales in China, the world’s biggest auto market, but has been losing ground in recent times.
It has three joint ventures in the world’s second biggest economy, about 90,000 employees and 39 plants manufacturing vehicles and components.
According to the Rhodium Group, a US think-tank focused on China, Volkswagen was the biggest European investor in the country in 2021.
But it has been hard hit by China’s economic slowdown coupled with fierce competition from local rivals, particularly when it comes to electric vehicles.
Chinese EV manufacturers, such as BYD, have captured market share with top-selling models packed with technology that appeal to local customers while VW has struggled with a troubled transition to electric cars.
Bloomberg reported last week that VW and one of its joint venture partners plan to close one plant in China and possibly more as sales of combustion-engine cars fall. VW refused to comment on the report.
Blume recognised the group’s problems in China, saying: “The cake has become smaller, and we have more guests at the table.”
– Strong links to the state –
Politics has played a key role at Volkswagen for decades. The state of Lower Saxony — home to VW’s historic Wolfsburg headquarters and several factories — holds 20 percent of the group’s voting shares.
This means it has a blocking minority, allowing it to stop key decisions.
This “hampers the company’s ability to adapt” and means it functions as “a state-owned company”, according to automotive expert Ferdinand Dudenhoeffer.
In addition employee representatives sit on the supervisory board, and wield a veto over the creation and relocation of production sites.
It is also almost impossible to close plants against their will.
– Troubled electric transition –
VW has poured huge sums into its EV shift but the transition has been troubled.
It has launched the ID range of cars, such as the ID.3, but the vehicles have experienced problems with their software.
Former VW CEO Herbert Diess has been criticised for the development of software in-house via subsidiary Cariad, with observers saying the project was costly and botched, and has left the German group lagging behind.
It is hoping to turn around its fortunes with a $5 billion investment in US electric vehicle maker Rivian to create a joint venture, a deal that was announced in June.
After Volkswagen’s bombshell announcement earlier this month that it could close factories in Germany for the first time, company management and unions will begin tense talks on a new pay deal Wednesday.
Here are some of the key challenges facing Europe’s biggest car maker:
– High costs –
Volkswagen has repeatedly stressed that its costs are excessive and profit margins too low, particularly at its core VW brand.
Production costs in Germany are “clearly too high”, said a leaflet from VW’s management distributed to the workforce at several sites in the country ahead of the talks.
“We have to increase our productivity. We have to reduce our labour costs.”
All areas would be examined — from development, to manufacturing and distribution — when it comes to cost-cutting, VW group CEO Oliver Blume told public broadcaster ZDF in an interview this week.
High electricity prices, which have risen since the energy crisis triggered by the Ukraine war, as well as elevated labour costs are a significant challenge for the 10-brand group in its home market.
Stefan Bratzel, a German automotive expert, told AFP that VW needs to become “much leaner”, as the company has “too many employees who don’t work hard enough and too many committees”.
Last year the flagship brand sold 2.52 million vehicles with 200,000 employees worldwide, including 120,000 in Germany.
In contrast, Japanese rival Toyota produced almost four times as many vehicles, 9.5 million, with barely twice as many employees.
– China challenge –
Volkswagen — whose brands range from Skoda and Seat to Porsche and Audi — makes around a third of its sales in China, the world’s biggest auto market, but has been losing ground in recent times.
It has three joint ventures in the world’s second biggest economy, about 90,000 employees and 39 plants manufacturing vehicles and components.
According to the Rhodium Group, a US think-tank focused on China, Volkswagen was the biggest European investor in the country in 2021.
But it has been hard hit by China’s economic slowdown coupled with fierce competition from local rivals, particularly when it comes to electric vehicles.
Chinese EV manufacturers, such as BYD, have captured market share with top-selling models packed with technology that appeal to local customers while VW has struggled with a troubled transition to electric cars.
Bloomberg reported last week that VW and one of its joint venture partners plan to close one plant in China and possibly more as sales of combustion-engine cars fall. VW refused to comment on the report.
Blume recognised the group’s problems in China, saying: “The cake has become smaller, and we have more guests at the table.”
– Strong links to the state –
Politics has played a key role at Volkswagen for decades. The state of Lower Saxony — home to VW’s historic Wolfsburg headquarters and several factories — holds 20 percent of the group’s voting shares.
This means it has a blocking minority, allowing it to stop key decisions.
This “hampers the company’s ability to adapt” and means it functions as “a state-owned company”, according to automotive expert Ferdinand Dudenhoeffer.
In addition employee representatives sit on the supervisory board, and wield a veto over the creation and relocation of production sites.
It is also almost impossible to close plants against their will.
– Troubled electric transition –
VW has poured huge sums into its EV shift but the transition has been troubled.
It has launched the ID range of cars, such as the ID.3, but the vehicles have experienced problems with their software.
Former VW CEO Herbert Diess has been criticised for the development of software in-house via subsidiary Cariad, with observers saying the project was costly and botched, and has left the German group lagging behind.
It is hoping to turn around its fortunes with a $5 billion investment in US electric vehicle maker Rivian to create a joint venture, a deal that was announced in June.
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