Wolfsburg, Germany — September 5, 2024. Volkswagen’s leadership is facing significant financial pressure, triggering high-level meetings between executives and workers to discuss necessary cost-cutting measures. At the forefront of these talks is Volkswagen’s Finance Chief, Arno Antlitz, who addressed a crowd of 25,000 employees at the company’s Wolfsburg headquarters. Antlitz delivered a clear message: the company has been spending more than it earns, a situation that cannot continue if the company is to succeed in the long term. His remarks were met with skepticism and even heckling from the workforce, reflecting deep-seated concerns among employees.
“We have been spending more money at the brand than we earn for some time now. That can’t go well in the long term. If we carry on like this, we won’t succeed in the transformation,” said Antlitz. He explained that Volkswagen’s financial challenges are not solely due to sales or product issues but are tied to broader market conditions, particularly in Europe. The European automotive market has been significantly impacted by the COVID-19 pandemic, with 2 million fewer vehicles sold annually compared to pre-pandemic levels. Before the pandemic, 16 million vehicles were sold each year, but this figure dropped to 12 million during and after the crisis, largely due to the global semiconductor shortage.
While the market has slightly rebounded, Antlitz warned that it is unlikely to return to pre-COVID levels. Volkswagen now expects annual sales in Europe to hover around 14 million vehicles, leaving a shortfall of 2 million compared to past years. With Volkswagen holding about 25% of the European market, the company will sell approximately 500,000 fewer vehicles—a figure equivalent to the output of two production plants. This situation, Antlitz emphasized, is not a reflection of the company’s product quality but a result of the shrinking market.
The pressure on Volkswagen to reduce costs is particularly intense in its German plants. Antlitz urged employees to work with management to enhance the cost-efficiency of the company’s sites, streamline operations, and leverage synergies within the Volkswagen Group. He stressed that the company has only a one- to two-year window to turn the situation around. His call for action comes as Volkswagen faces stiff competition, especially in the electric vehicle (EV) market.
Volkswagen’s struggles are not limited to Europe. The company’s once-dominant position in China, a cornerstone of its financial success, is now under threat. Volkswagen Group CEO Oliver Blume warned employees that they could no longer count on profits from China to stabilize the company’s finances. “There are no more checks coming from China,” Blume stated, noting that the Chinese market has become more competitive, with rivals such as BYD overtaking Volkswagen as the top-selling car brand. As Volkswagen’s market share in China declines, so do its profits.
In Germany, tensions are rising as reports suggest that Volkswagen is considering closing two factories, a move that would mark the first time the company has shut down a plant in its home country. One of the plants reportedly at risk is the Transparent Factory in Dresden, which manufactures the ID.3 electric hatchback. The potential closures put Volkswagen on a collision course with its powerful unions, which are determined to protect jobs. The state of Lower Saxony, which holds a fifth of Volkswagen’s shares, is also likely to oppose any job cuts.
Volkswagen’s Workers’ Council, led by Daniela Cavallo, has sharply criticized management, accusing it of eroding the trust of the workforce. According to Reuters, the influential IG Metall union has not ruled out strikes as tensions escalate. Cavallo has expressed frustration with CEO Blume’s focus on a €5 billion software partnership with American startup Rivian, prioritizing this venture over the protection of German jobs.
Volkswagen’s costly investments in electric vehicles are seen as crucial for the company to remain competitive in the evolving automotive industry, but these investments are also draining resources at a time when cost-cutting is critical. The company has also faced setbacks from the German government’s removal of EV subsidies, which has impacted sales. To mitigate the effect, Volkswagen had to cover the subsidies for buyers, a move that added further financial strain. Despite launching a cost-cutting program last year, reports indicate that Volkswagen has fallen short of its targets by several billion euros.