German outlet DW reported last week:
In a letter to employees on Monday, VW brand chief Thomas Schäfer described the situation as “extremely tense” and beyond the scope of “simple cost-cutting measures.” VW Group CEO Oliver Blume added that the European automotive market is in a “highly challenging and serious situation,” and that Germany has fallen behind in terms of competitiveness.
As a result, the 10 car brands within the VW Group must be comprehensively restructured, and “plant closures are no longer excluded,” Blume said, adding that layoffs through early retirement and severance packages are also no longer sufficient. Therefore, VW feels “compelled to terminate the employment protection agreement that has been in place since 1994.”
To make matters even worse for the 680,000 VW employees worldwide, the management also feels forced to end its job security program which has been in place since 1994 and prevents job cuts until 2029.
Additionally, Reuters provided some extra context to the situation in Germany:
A difficult economic environment, new rivals in Europe, and the falling competitiveness of the German economy meant Volkswagen needed to do more, Blume told its management.
Volkswagen, whose shares closed 1.2% higher after the news, has lost almost a third of its value over the past five years, making it the worst performer among major European carmakers.
It faces a challenging landscape of challenges in Europe, the U.S. and especially China, where domestic EV makers led by BYD are grabbing its market share. It has lost more stock value than any major competitor over the past two years.
Volkswagen’s plans are the latest blow to German Chancellor Olaf Scholz, whose three-way coalition was slammed in regional votes on Sunday that saw the far-right Alternative for Germany party top the poll in one state and come second in Saxony.
Carsten Brzeski, global head of macro at ING Research, said the decision highlighted the consequences of years of economic stagnation and structural change without growth.
“If such an industrial heavyweight has to close factories, it may be the long overdue wake-up call that (Germany’s) economic policy measures need to be stepped up considerably.”
Germany’s economy ministry said VW management must act responsibly within a challenging market environment, but declined to comment specifically on planned cuts.
IG Metall said the decision “shakes the foundation” of Volkswagen, which is Germany’s largest industrial employer and Europe’s top carmaker by revenue.
Cavallo said in an interview on Volkswagen’s intranet that its management had made “many wrong decisions” in recent years, including not investing in hybrids or being faster at developing affordable battery-electric cars.
Instead of plant closures, the board should be reducing complexity and taking advantage of synergies across the Volkswagen group’s plans, said Cavallo.
Learn more about the situation below:
AUTHOR COMMENTARY
The announcement of these closures is one of the many symptoms of the collapsing German and European economies – a bad cold that will infect other Western nations as well as economic and power shifts towards the BRICS nations.
All of these ridiculous sanctions and neoliberal, progressive policies have brought Germany and Western economies to this point.
Job 12:21 He poureth contempt upon princes, and weakeneth the strength of the mighty. [23] He increaseth the nations, and destroyeth them: he enlargeth the nations, and straiteneth them again.
[7] Who goeth a warfare any time at his own charges? who planteth a vineyard, and eateth not of the fruit thereof? or who feedeth a flock, and eateth not of the milk of the flock? [8] Say I these things as a man? or saith not the law the same also? [9] For it is written in the law of Moses, Thou shalt not muzzle the mouth of the ox that treadeth out the corn. Doth God take care for oxen? [10] Or saith he it altogether for our sakes? For our sakes, no doubt, this is written: that he that ploweth should plow in hope; and that he that thresheth in hope should be partaker of his hope. (1 Corinthians 9:7-10).
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