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Drama at Volkswagen After CEO Suggests 30,000 Job Cuts
Volkswagen CEO Herbert Diess has been facing off with the company’s German workforce for weeks over the changing nature of the business. VW vowed to transition itself toward an all-electric lineup following the 2015 diesel emissions scandal. But the necessary steps to get there haven’t been universally appreciated.
The general assumption has always been that electric vehicles would result in massive layoffs across the industry by nature of their needing fewer parts than internal combustion vehicles. But Volkswagen seems worried that it’s falling behind smaller rivals and needs to take decisive action to make sure it’s not outdone by firms operating in the United States and China. The proposed solution is an industrial overhaul designed to fast-track VW’s electrification goals. Unfortunately, German labor unions are convinced that this plan would incorporate massive layoffs and have become disinclined to offer their support. The issue worsened in September when Diess told the supervisory board that a slower-than-desired transition to EVs could result in 30,000 fewer jobs.
Considering the size of most legacy automakers, there’s really no way around these prospective layoffs. Batteries, which represent the most labor-intensive aspect of an EV, are often outsourced to other companies and the residual work simply doesn’t require the same number of hands. Companies are seeing the table set before them. Fewer workers mean diminished payroll expenses and, since EVs have been heavily subsidized by governments, they can afford to sell more expensive products without consumers getting up in arms.
However, the capital expended just to get to this point has been nothing short of massive. Volkswagen has said it intends to spend around 16 billion euros ($19 billion USD) on developing “e-mobility, hybridization and digitalization” by 2025. Additional funds have been set aside for charging subsidiaries and its autonomous vehicle program — the latter of which is finally supposed to yield fruit by 2030.
Those with reliable memories will recall that the automotive industry was previously promising self-driving passenger vehicles would be on sale by 2019. The timeline for electrification has been similarly pushed back, albeit not nearly as much. EVs are still presumed to reach financial parity with combustion vehicles by 2025. Though their adoption rate is not on pace to supplant them as the dominant mode of transportation for at least another decade, even with aggressive mandates designed to discourage gasoline/diesel use cropping up across the Western world.
This means companies are spending more to make EVs work for them and it’s looking like Volkswagen is getting tired of waiting. It wants to be the next Tesla, only much bigger, and leadership believes it should free up more money to expedite the process. But labor unions are starting to wonder what’s actually in this for them besides a few thousand fewer jobs and the current conflict is only widening the existing rifts with management.
“I’m being frequently asked why I keep comparing us with Tesla. I know this is annoying to some,” Diess told workers this week. “Even if I no longer talk about Elon Musk: he’ll still be there and revolutionises our industry and keeps getting more competitive quickly.”
According to Reuters, Diess has actually been having a series of meetings with German labor groups who have been expressing their growing dismay with electrification strategies over the last couple of years.
“Only as a team can we make Volkswagen future-proof,” The CEO pleaded in one such meeting attended by VW works council boss Daniela Cavallo, Lower Saxony state premier Stephan Weil, and head of IG Metall Joerg Hofmann.
From Reuters:
The conflict highlights the limitations Diess faces in steering the behemoth that employs 675,000 staff and navigating a complex stakeholder structure, where labour representatives and the state of Lower Saxony have a majority on the supervisory board.
Sources familiar with the matter said on Wednesday a specially convened committee would discuss the future of Diess in an attempt to solve the dispute.
Works council boss Cavallo criticised Diess for his communication style in recent weeks, which she said fuelled concerns the transformation he was proposing will result in tens of thousands of job cuts.
“We’re tired of hearing time and again that the works council is apparently only concerned with preserving the status quo,” she said, adding workers and labour representatives were all backing the needed overhaul.
Diess, in a supervisory board meeting in September, warned that as many as 30,000 jobs could be lost if Volkswagen was not fast enough in transforming itself, sources have said. He has said Tesla is much more efficient with its much smaller workforce.
That may be true. But Elon Musk has said that Tesla’s smaller size has also made it harder to get favorable treatment from Western governments, citing the Biden administration’s decision to prioritize union-backed EVs in its tax credit scheme and Germany’s fierce pushback against the Berlin-Brandenburg Gigafactory.
Tesla being barred from the White House EV summit has also become a point of contention. “Yeah, seems odd Tesla wasn’t invited,” Musk said in August, adding that his company produced more electric cars than any other company in the world.
When White House press secretary Jen Psaki was asked why Tesla had been excluded from the event she said that the press was welcome to draw its own conclusions.
Diess has said Mr. Musk has been in contact with Volkswagen leadership and even spoke with them for over an hour during an October phone call. Though Volkswagen’s works council reportedly wasn’t all that impressed by the supervisory board’s alleged closeness with Tesla.
“The fascination that you apparently feel for Mr. Musk and the effort you’re making in staying in contact with him — we would welcome if it was the same for the huge challenges the company currently faces,” Cavallo said in response.
[Image: Volkswagen Group]
Porsche, Piech families back VW CEO
despite friction with union
Diess's relationship with German labor
bosses has hit a new low over a radical
overhaul to catch Tesla
November 05, 2021 07:03 AM
FRANKFURT -- The Porsche and Piech families, which control Volkswagen Group's largest shareholder Porsche SE, continue to support the automaker's CEO, Herbert Diess, a spokesperson for Porsche SE said on Friday.
"The families continue to back Diess. There has been no change in their position," the spokesperson said.
The comments come after Diess' relationship with German labor representatives hit a new low this week with disagreement over how radically Europe's top automaker must overhaul itself to achieve electric vehicle dominance over Tesla.
Porsche SE, which is 50 percent-owned by the Porsche and Piech families, is Volkswagen's largest shareholder with 31.4 percent of shares. Qatar and the state of Lower Saxony, where Volkswagen is based, own 14.6 percent and 11.8 percent, respectively. Between them they hold more than 90 percent of the voting rights, but on VW's supervisory board -- which approves key strategic decisions -- labor representatives hold half of the 20 seats as part of Germany's co-determination principle.
In the rare event of a stalemate on the board, the chairman -- in this case Porsche SE CEO Hans Dieter Poetsch -- holds sway.
Diess has urged German workers to prepare for a deeper overhaul to remain competitive when Tesla ramps up vehicle production at its first European factory outside Berlin next year.
The CEO canceled a trip to the U.S. this week where he was supposed to meet investors and visit technology firms on the West Coast to soothe growing tensions with VW's powerful union leaders at home.
Daniela Cavallo, head of the powerful works council at VW, called on Diess to focus his attention on resolving the persistent chip shortage that hit VW harder than Tesla or BMW, instead of engaging in social media activities.
"You supply us frequently with nice pictures from your trips, but unfortunately still not with semiconductors," she said.
Diess, whose contract was extended until 2025 in July, is currently hammering out the company's next investment plan to 2030, a process that usually causes friction among stakeholders each year.
The 63-year-old executive has been repeatedly criticized for his communication style that labor representatives say displays a lack of interest in the concerns of 675,000 employees around the world.
Diess, in particular, drew the ire of workers when he told VW's supervisory board in September that roughly 30,000 jobs were at risk if the company was too slow in its EV transition, sources have said.
Automotive News Europe contributed to this report
CEO Herbert Diess has clashed again with labor representatives over plans to take on Tesla
VW
VW's Diess, left, is pictured with Tesla's Musk. Diess expects the U.S. company will require just 10 hours to build each vehicle at its plant near Berlin, against the 30 hours VW currently needs.
FRANKFURT Reuters -- Volkswagen Group CEO Herbert Diess' frail relationship with German labor representatives hit a new low this week with disagreement over how radical the overhaul at the automaker must be in its quest for electric-vehicle dominance.
While both sides tried to demonstrate unity at a staff meeting on Thursday, the first at VW's giant Wolfsburg plant in nearly two years, there is no guarantee the dispute can be fixed quickly if it can be fixed at all.
In fact, VW's four-member mediation committee is planning to discuss Diess' future soon, sources have said, creating uncertainty around the automaker's leadership less than four months after the CEO's contract was extended.
Is Diess still the man for the job?
Daniel Schwarz, analyst at Stifel, thinks so. "His consistent EV strategy makes sense. He has a stronger focus on capital markets than his predecessors, which is benefiting the Volkswagen share," he said.
While VW's preferred shares have gained just 6 percent since Diess took over as CEO in April 2018, its common stock - more than half of which is owned by top shareholder Porsche SE - is up 68 percent.
Diess, whose contract was extended until 2025 in July, is currently hammering out the company's next investment plan to 2030, a process that usually causes friction among stakeholders each year.
Bernstein analyst Arndt Ellinghorst is more skeptical. "Diess stands for the radical change the company must go through after the dieselgate emissions scandal. What he does not yet stand for is implementation."
Porsche boss Oliver Blume, Audi CEO Markus Duesmann as well as Volkswagen brand CEO Ralf Brandstaetter have all been named as potential successors in the event that Diess is fired or decides to leave the multi-brand group.
"You need someone in Wolfsburg who understands the company and who is prepared to engage with the works council. I do not know if Oliver Blume is the right person," Ellinghorst said. "Ralf Brandstaetter could possibly be better at that."
Why all the fuss?
VW, the world's second largest automaker after Toyota, is under pressure to adapt to huge industry shifts, most notably the rise of EVs and self-driving cars.
Both areas are outside the comfort zone of German automakers, including VW, who have long dominated the age of internal combustion engines.
Enter new rivals, particularly Tesla, which have started with a clean sheet of paper and revolutionized production and supply chains.
"In the world of combustion engines we are leading. We are good at that, maybe better than everyone else," Diess told workers on Thursday. "But in the new world ... we are facing competition Volkswagen has never seen before."
Why is Diess bothering the works council?
The 63-year-old executive has been repeatedly criticized for his communication style that labor representatives say displays a lack of interest in the concerns of 675,000 employees around the world.
Diess, in particular, drew the ire of workers when he told VW's supervisory board in September that roughly 30,000 jobs were at risk if the company was too slow in its EV transition, sources have said.
The same goes for some of Diess' social media activities, including a video of him thanking staff for record first-half results while surfing on the canal next to the Wolfsburg headquarters.
"The way you have presented yourself in recent months I do wonder whether you are actually aware of the situation at our site here and how this is being perceived by the workforce," works council head Daniela Cavallo said on Thursday.
Why is Tesla bothering Diess?
The U.S.-based automaker has shown it is not just the number of cars you make, but technology and software that determine success in the new auto world.
Tesla, which sold 627,350 vehicles in the first nine months of 2021, is worth $1.2 trillion, more than eight times Volkswagen's 124 billion euros ($143 billion) market valuation, even though the German group sold 11 times as many cars in the period.
Tesla is also producing more quickly and efficiently, with Diess expecting the U.S. company will require just 10 hours to assemble each vehicle at its planned Gruenheide plant near Berlin, expected to open later this year.
"In (our plant in) Zwickau we are at more than 30 hours, we hope to achieve 20 hours next year -- our original project target was 16 hours," Diess said.
Who holds the power?
At 31.4 percent, Porsche SE, which is 50 percent-owned by the Porsche and Piech families, is VW's largest shareholder, while Qatar and the state of Lower Saxony, where Volkswagen is based, own 14.6 percent and 11.8 percent, respectively.
Between them they hold more than 90 percent of the voting rights, but on VW's supervisory board - which approves key strategic decisions - labor representatives hold half of the 20 seats as part of Germany's co-determination principle.
In the rare event of a stalemate on the board, the chairman - in this case Porsche SE CEO Hans Dieter Poetsch - holds sway.
Volkswagen CEO says Tesla factory will
threaten German jobs
Cecilia Jamasmie | November 4, 2021 
Musk, who is currently awaiting the opening of Tesla’s first European gigafactory in Gruenheide near Berlin, dialled into a meeting of top level Volkswagen executives in October. (Image: Herbert Diess |Twitter.)
Volkswagen chief executive Herbert Diess told workers on Thursday to brace for a deeper company overhaul when US electric vehicle (EV) maker Tesla starts ramping up production at its first European factory outside Berlin next year.
The CEO has been pushing to speed up plans for a fundamental transformation of the company to prepare for the era of autonomous EVs.
Addressing thousands of workers at the VW’s Wolfsburg plant, Diess told them they needed to work together to make the company “future-proof.”
Tesla is on track to achieve a production time of just 10 hours per car at its Gruenheide plant, Diess said. VW’s main EV factory in Zwickau currently needs more than 30 hours per vehicle, which should be reduced to 20 hours next year.
The executive said the next VW Golf, the company’s best seller, should not be made by Tesla, or come from China. “The next icon in the market must be one made in Wolfsburg, VW hometown,” Diess said through Twitter.
The next VW Golf can’t be a Tesla
The next VW Golf can’t come from China
The next icon has to be again one of Wolfsburg – the city where VW’s headquarters are – : The Trinity!
VW’s new works council chief Daniela Cavallo called on Diess to focus his attention on resolving the persistent chip shortage that hit VW harder than Tesla or BMW, rather than engaging in social media activities.
She was partially referring to Elon Musk recent appearance via video at a VW executive meeting, after being invited to do so by Diess.
The lack of chips forced VW to slash output at Wolfsburg to the lowest level in almost 70 years.
The slow-down has resulted in the delivery of 122,100 all-electric cars, including a small number of commercial vehicles, in the third quarter of 2021. Tesla produced, in the same period, 241,300 units.
RELATED: Tesla vs Volkswagen 2021 battery power comparison
VW, which owns Porsche, Audi, Skoda and SEAT, sold 231,600 battery electric vehicles in 2020. That’s less than half the number of sales Tesla made, but it represents an increase of 214% on the previous year. Rapid growth is expected to continue as Volkswagen launches 70 electric vehicles and opens six battery gigafactories in Europe before the end of the decade.
The automaker’ substantial investment in EVs – €35 billion ($41.7 billion) by 2025 is centred on cell technology and further downstream in the form of charging infrastructure and recycling of spent batteries.
Shortages
Both VW and Tesla may see plans thwarted by an expected shortage of battery metals, namely nickel and lithium.
Musk has expressed worries about a nickel supply. He pleaded with miners last year to produce more nickel, promising a “giant contract” for supply produced efficiently and in an “environmentally sensitive way.”
Last month, the EV giant inked a multi-year nickel supply deal with New Caledonia’s Prony Resources. The contract guarantees it about 42,000 tonnes of the metal needed to produce the batteries that power its EVs.
Tesla also has a similar agreement with BHP.
VW is said to be in talks with suppliers to secure direct access to raw materials
