“Earthquake at Volkswagen” read a grim headline in the newspaper. Wolfsburg Newsa newspaper serving a northern German city synonymous with the car manufacturer.
News that crisis-hit Volkswagen is considering closing factories in Germany for the first time in its history, prematurely ending 30-year-old job protection agreements as part of a savings drive of around €10 billion (£8.4 billion), was barely conveyed to workers exiting Gate 17 at Volkswagen's main plant in Wolfsburg on Monday. Just one reporter was sent out to capture reactions at the end of the shift.
But they weren't surprised. “The mood has been down for a while,” one worker said. Another said they were stressed by a sense of looming doom at the company and an atmosphere of uncertainty, most recently manifested in canceled shifts, and “unusually high sickness rates” among employees. “We knew something was going on,” another said.
Two days later, a tense showdown took place between company executives and an estimated 15,000 workers – 10,000 of them packed into a large hall at the Wolfsburg plant, with the rest unable to get inside and watching on a screen outside.
The workers erupted in collective rage, carrying banners and chanting protest slogans, including “We are Volkswagen, you are not.” For about 20 minutes, witnesses said, the noise of slogans and whistling prevented the managers from speaking (the media was barred from the hall). Instead, they stood behind a long table, expressionless and a little embarrassed. Dressed in open-necked white shirts and black jackets, their summer tans seemed to fade in the bright light and frosty air.
“We're short about 500,000 cars a year,” Volkswagen Finance Chief Arno Antlitz was quoted as saying at the event. He said that was the equivalent of two factories producing cars. “This is not due to our products or poor performance. The market simply doesn't exist anymore.” He gave the company “one to two years” to turn the situation around. Experts estimate that Volkswagen has around 20,000 more employees.
Oliver Blum, CEO of the Volkswagen Group, sounded like a father talking to his family at the dinner table. He made it clear to employees that the company had been breaking even for about 15 years, withdrawing an estimated 1.5 billion euros a year from its cash flow, and that something had to change. He likened the situation to “a family piggy bank that is empty at the end of the month.”
Sometimes they have kind relatives who help cover extra expenses, such as a new TV, he said, before pointing out bluntly that China has essentially played that role for years, and that sales there help fund the company.
At one point Blume, a native of Lower Saxony who knows all too well that Volkswagen underpins the state's economy and, ultimately, its identity, appeared to take off his mask and grow emotional, speaking of his desire to “protect the Volkswagen family”.
In a sign of the passion that will shape the upcoming fight, Daniela Cavallo, head of the union representing the company's 120,000 employees in Germany, countered: “We are a VW family, and the family leaves no one behind.” She promised to “vigorously resist” the company's austerity measures and insisted: “We will not accept liquidation.” Strikes, a rare event in the company's history, have not been ruled out.
For the 87-year-old company, founded under the dictates of the Nazi government and driven by the dream of building a cheap “people's car” — a Volkswagen — what's at stake isn't just Wolfsburg, Lower Saxony or the six sites across Germany from Emden to Zwickau where Volkswagen has deep roots. “Volkswagen's crisis … is a German crisis,” Cavallo said.
The last major setback VW faced was the so-called Dieselgate scandal of 2015-2016, when it was discovered that the company had falsified emissions test results to make its vehicles appear more environmentally friendly than they actually were, costing the company an estimated €30 billion in damages worldwide and dealing immense damage to its reputation as a symbol of German engineering and reliability.
The fall in tax revenues for local governments at that time shows how widespread VW's influence is across Germany and what it means for a potential decline in its industrial power.
“The location of our plant is an engine for the whole region,” Cavallo said. Local business tax cuts as a result of Dieselgate have negatively impacted the daily lives of millions of people, she added. Dieselgate has severely strained local government finances, with street lights being turned off in some areas, burial costs skyrocketing in others, and one town “even having to stop rat-control services.”
As opposition parties in the Bundestag tried last week to seize on the fallout and present it as a symptom of deeper, wider problems in the German economy, Gitta Konnemann, a leading pro-business member of the opposition Christian Democratic Union (CDU), highlighted the potential for ripple effects across the economy.
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“When VW coughs, Germany catches the flu,” she declared, calling on Olaf Scholz's government to intervene.
“The car industry remains the most important industry in Germany and VW is the giant in this sector. When the giant shakes, they all shake,” Carsten Breszke, chief economist at Dutch international lender ING, told German media, noting that Volkswagen is more important to the European economic powerhouse “than the entirety of trade with Greece.”
Some blame the company's woes on the government, whose environmental policies have led to sluggish domestic auto sales and rising energy prices, failed to deliver on promises to cut bureaucracy and abruptly ended subsidies late last year, removing incentives for buying electric cars.
But there is plenty of criticism within the company, particularly at Volkswagen's own failure over the years to seize the opportunities presented by the electric and hybrid car market. Why, unlike its Chinese rivals, was Volkswagen so slow to produce an entry-level model that the masses could buy, like the hit Volkswagen Beetle? It's just one of a host of “business mistakes” causticly cited by Cavallo, who suggests the company has long since lost its folksy touch. “The 'Volk' seems to have gone out of Volkswagen,” one commentator said last week.
But the reality is that Europe is currently producing 2.5 million fewer cars than it was five years ago. The electric vehicle market fell 69% year-on-year in August, a figure blamed on falling consumer confidence. And one in five electric cars sold in Europe is made in China. VW's affordable, entry-level electric car due to go on sale next year is being made on the Iberian Peninsula, not in Germany.
“From a purely economic point of view, there are fewer and fewer arguments in favour of production in Germany,” said Helena Wiesbart of the Centre for Automotive Research in Duisburg.
Representatives of VW's ever-prestigious apprenticeship program — long the envy of many companies and countries — returned to the floor of Wolfsburg's Hall 11 on Wednesday. Future Defense (“A sense of security for the future” and a sense of responsibility towards the younger generation.) She accused the company of misleading new recruits about possible cuts to the 1,000 training places guaranteed by VW per year.
“I don't recognise this company anymore,” Gianna Leo, of GJAV, an organisation that represents youth apprenticeships, told the crowd. “This is not the VW I remember when I started.” Her words were met with cheers and a standing ovation from workers, and renewed boos and whistling at executives.
