Volkswagen shares fall in Frankfurt; CEO Blume describes the situation as ‘more than critical’

(Il Sole 24 Ore Radiocor) - Volkswagen takes a tumble on the Frankfurt Stock Exchange (DAX 40 ), following CEO Oliver Blume’s weekend comments on the group’s difficult situation and ahead of a series of crucial meetings with staff and the authorities regarding the planned drastic cost-cutting measures.

In an interview published on the company’s intranet on Friday, Blume stated that the situation is “more than critical” and emphasised that Volkswagen and the entire German automotive industry are going through “the most turbulent period in their history” due to an unfavourable global economic climate and competition from China. The CEO, who is due to meet with employee representatives in the coming days at Volkswagen’s headquarters in Wolfsburg and at the plants in Zwickau and Emden to provide an update on the company’s plans, indicated that no decisions have yet been taken regarding plant closures. However, he warned, ‘at present, we see no possibility that the plants in Emden, Hanover, Zwickau and Neckarsulm will remain profitable in the 2030s’. Closing plants would always be ‘a last resort, and the most costly one’, Blume emphasised. For plants where car production would become ‘unprofitable’, Volkswagen is considering other ‘industrial solutions’, Blume said, mentioning advanced discussions with defence sector companies regarding the use of the Osnabrück plant. “The coming weeks will be decisive: everyone must play their part. We have put in place the largest transformation plan in the history of the Volkswagen Group,” Oliver Blume also told the newspaper “Bild am Sonntag”. The CEO estimates production overcapacity at 500,000 vehicles a year and puts overheads at 30 per cent higher than those of the competition. “The often-cited figure of around 50,000 job cuts globally is not a fixed target,” Blume further clarified.

In July, the CEO presented a cost-cutting plan to Volkswagen’s supervisory board, but no decision was taken. German media reported at the time that the government of Lower Saxony, which holds a 20 per cent stake in the Volkswagen Group, had refused to approve the plan. The Minister-President of Lower Saxony, Olaf Lies (SPD), will visit the Volkswagen plant in Hanover on Monday to find out more about the situation at the struggling group. At the invitation of the General Works Council, meetings are planned with members of the Works Council, employee representatives and the plant’s local management. The VW Group has already approved the cut of 50,000 jobs. According to Blume, agreements have already been reached with 37,000 employees as part of this plan. “We can only succeed if everyone supports this plan,” the CEO emphasised. The leader of the powerful IG Metall trade union, Christiane Benner, criticised the management on Friday and warned that employees would oppose the closure of the plants. “Volkswagen workers have already had to accept heavy and painful cuts, and now they are suffering another severe blow,” Benner told the weekly magazine ‘Wirtschaftswoche’. CEO Blume will answer employees’ questions during an extraordinary general meeting of staff to be held on Tuesday in Wolfsburg. Further meetings are scheduled for Wednesday in Emden and Zwickau. The trade union has described the management’s communication policy as ‘disastrous’.