German car in crisis

Vw, here's how it will cut 4 billion. Audi, Brussels to close in February

Wolfsburg might sell some production sites. Demonstrations and strikes in several cities. The Belgian site the first of the group to close in Europe

by Finance Review

29 October 2024

3' min read

Key points

Here's how Vw wants to save 4 billion
VDA and McKinsey's gloomy predictions
Worker protests in Germany

3' min read

Audi has announced that it will cease production of electric vehicles at its Brussels plant by 28 February 2025. This decision, announced during an extraordinary meeting with trade union representatives, concerns a plant that employs around 3,000 workers for the production of the Q8 e-tron electric suv, which has entered a crisis due to a lack of demand. Local sources report that sales of this model have dropped significantly, and the high costs of the plant in the Belgian capital have made the closure necessary, which would be the first for a plant of a Volkswagen Group brand in Europe.

According to Ludovic Pineur, secretary of the trade union Cne Industrie, there might be a new investor interested in the Brussels site. However, at the moment it is not clear how many workers could be kept on or whether the entire plant will be used by the potential buyer, a commercial vehicle company. More information is expected at the next meeting with the trade unions, scheduled for 12 November.

Here's how Vw wants to save 4 billion

The world's second-largest car manufacturer (the stock closed heavily in the red yesterday: -3.85%) may soon announce plans to close (or sell) three out of 10 plants in Germany for the first time in its 87-year history, in addition to mass redundancies and wage cuts of 10%. The aim is to save 4 billion in order to regain profitability. At least 2 billion could come from wage cuts and further savings, such as the cancellation of certain bonuses, allowances and increases.

The group's top management has not yet responded to the demands for dialogue made by the workers' representatives, and the unions expect protests to intensify in the coming weeks. The next round of talks is scheduled for today, when the group's third quarter results could lay bare the extent of the problems. Analysts expect a 40 per cent drop in operating profit. The government led by Olaf Scholz has initiated meetings with Volkswagen CEO Oliver Blume, but nobody believes in quick results. Meanwhile, the International Monetary Fund has joined those calling for reforms in Germany, suggesting that the government abandon the debt ceiling enshrined in the constitution and known as the debt brake, so that investment can be revived.

The gloomy forecasts of VDA and McKinsey

The transformation of the German automotive industry could lead to the loss of 186,000 jobs by 2035, according to a study commissioned by the automotive industry association VDA. A quarter of those jobs have already been cut.

According to a McKinsey study, this is 'only the first wave'. "If the industry's challenges are not effectively addressed, the gross value added for the European automotive sector could fall by 36 per cent in the most disruptive scenario, to a total value of USD 410 billion," the study claims. The situation needs to be addressed by 'innervating the industry with new talent and skills', from Adas (assisted driving systems) to connectivity, from sustainable fuels to electrification. The key will not only be to solve individual technological market challenges, argues the global consultancy giant, but also to 'rejuvenate' the European automotive industry with new talent and skills to create and grow European disrupters.

Worker protests in Germany

The prospects of plant closures and job cuts have provoked strong reactions among German workers. Strikes by unionised workers in the electrical and metal industry, which employs almost 4 million people, affected companies such as Porsche, Bmw, Mercedes, and of course Volkswagen. In several cities, demonstrations and strikes began to express dissent against the group's restructuring plan. The trade unions denounce the employment repercussions of the announced measures, pointing out that the announced cuts threaten not only employment but also the local industrial fabric.

Tuesday's strikes were orchestrated by the powerful IG Metall union, which also staged a protest during the night shift at the Volkswagen plant in Osnabrück, where workers argue that the site is among three (out of ten) at risk of closure.

IG Metall is demanding a 7% wage increase compared to the 3.6% increase over a 27-month period offered by the employers' associations. The companies claim that the demands are unrealistic.

At the Porsche plant in Zuffenhausen, Stuttgart, 500 employees went on strike during the night shift and then around 4,000 employees went on strike during the morning shift to take part in a demonstration, according to a release.

In the Bavarian city of Ingolstadt, Audi's headquarters, workers marched to music, whistling and waving flags. (Al.An.)