It was almost a bit too quiet by VW standards in the first few months after the new CEO Oliver Blume took office. But now it’s clear: He used the time to take a close look at the individual divisions. Apparently he didn’t like what he found on some corners. After replacing the board of directors at the software division Cariad, there should also be changes in the core brand VW. You have to save to increase returns. It’s about billions.
The bearer of this message was VW brand boss Thomas Schäfer. In an internal communication that the SZ has seen, Schäfer initially talks about a “performance program” only to later become clear: “We see that our brand – despite all its strengths – is not yet economically solid enough.” In the first quarter, VW only managed a three percent return. That is less than other brands in the group. In the letter, Schäfer also mentions the future goal: “In order to be really crisis-proof, we need a sustainable return on sales of 6.5 percent.”
Seen in and of themselves, these numbers are not surprising, as the VW brand has recently been struggling not only with the shortage of semiconductors, but also with many other home-grown problems: In the most important market, China, there is a risk of losing touch with electric cars, and in Europe, too, there have always been problems with e-models again, especially with the software. VW has now made progress on many of these points, but the competition from China and above all Tesla still manage to build their cars at significantly lower costs. In addition, the VW managers see the forecasts for the coming months: The situation on the chip market is easing more and more, the high order backlog, which has also carried the Wolfsburg financially through the past few months, will probably be processed by the end of the year at the latest.
Tesla pushes prices down – and VW can’t just keep up
The price war, which the US carmaker Tesla in particular keeps fueling by lowering the prices for its cars several times by several thousand euros, is likely to have created even greater pressure to act in Wolfsburg. With a clearly double-digit return on sales, which Tesla still has to show, the electric car manufacturer can currently still afford such price experiments. But at VW, with the already low three percent margin for the largest group brand, things are very different. Once again, the Wolfsburg-based group is made aware of the fact that anyone who has to laboriously transform themselves towards e-mobility with a complete combustion engine business will find it difficult to keep up. Especially if he still has a powerful works council breathing down his neck, which is critical of every step taken.
So far, things have been much more harmonious between the employee representatives and the new group board of directors than with ex-boss Herbert Diess. But will it stay that way? The first information on how the new austerity program should look like contains at least no direct indications of a planned downsizing. In any case, there is a job guarantee at the Wolfsburg main plant until 2029. But how are the planned three billion euros to be saved per year then? VW boss Schäfer wants to start in production, among other things. “We don’t align our plants to brands, but to platforms. This then determines which models are produced there. Not the other way around,” he announced. That alone will bring billions of euros in savings in the so-called volume brand group, which also includes Škoda, Seat and the small VW commercial vehicles.
Working groups are to work out concrete measures in the “coming weeks and months”. Volkswagen intends to present initial results to investors and analysts at its Capital Markets Day on June 21. In the internal letter to the workforce, Schäfer also says that it is still too early to give details. The workforce is to be informed about concrete steps together with the works council.
From the employee side, the head of the VW works council, Daniela Cavallo, has already made it clear that she expects participation. “We have taken note of the corresponding goals of the brand board, and talks about them now have to be held,” she said in a statement. Profitability and job security are equal and common goals. “There are no collective bargaining cuts or reductions in our job security,” she added. However, since fewer people are needed to build electric cars than for combustion engines, there should still be discussions in the future about how the group’s restructuring should be structured – and above all at what speed.
In one of the most important projects in the group, however, a decision is still being delayed: the construction of a plant for the new generation of electric cars, called “Trinity”, was actually supposed to start this spring. But it is currently still unclear whether a new factory should be built on a green field or whether the Wolfsburg main plant should be converted. The group is still considering options for converting its main plant to the construction of a new generation of electric cars, said Arno Antlitz, who in addition to the finance department also manages the operational business of Europe’s largest carmaker.