Volkswagen CEO signals major change ahead for the company

By Al Mayadeen English
Source: Agencies
9 Sep 2024 16:16

Group Chief Oliver Blume justifies Volkswagen job cuts, pointing to the "severe" economic conditions, as reported by German media.

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An official photo of Oliver Blume, CEO Volkswagen Group (Volkswagen Group)

Volkswagen Group is facing a critical situation, and significant changes are essential for its survival, according to CEO Oliver Blume, as reported by the newspaper Bild.

Blume's comments come in the wake of the company's announcement earlier this month about the potential closure of at least two factories in Germany, a move that would mark a first in the company’s nearly 90-year history.

In an interview with the newspaper on Sunday, Blume defended the planned job cuts, stating that the current economic conditions are "so serious that we can’t simply continue as we were."

The automaker's operating profit fell by 20% in the first quarter of 2024 compared to the same period the previous year, with a further 2.4% decrease in the second quarter.

Implementing the job cuts could save Volkswagen €4 billion ($4.25 billion). Blume indicated that the board is considering "further measures" to navigate the downturn in car sales, noting that Volkswagen employs around 120,000 people in Germany.

Blume attributed the major challenges facing the European auto industry to the impact of the pandemic from four years ago and the rise of Asian competitors in the market.

“The pie is getting smaller, and we have more guests at the table,” said the top executive of the group that owns car, truck, and motorcycle brands such as Audi, Bentley, Lamborghini, SEAT, Skoda, Porsche, Scania, and Ducati.

The big picture

The European Union has emerged as the largest overseas market for Chinese electric vehicle (EV) manufacturers. According to recent research, the value of EU imports of Chinese electric cars surged to $11.5 billion in 2023, up from just $1.6 billion in 2020, and now represents 37% of all EV imports to the bloc.

Critics of Volkswagen’s planned job cuts have highlighted that the company distributed €4.5 billion to its shareholders for the 2023 financial year in June.

Left Party chairwoman Janine Wissler criticized this decision in an interview with Rheinische Post, calling it "incredibly sleazy" that Volkswagen could issue such substantial dividends while now claiming it cannot avoid plant closures and job losses.

“If VW really needs money so urgently, then the major shareholders… should pay back this €4.5 billion,” Wissler stated.

In related news, the German economy contracted in the second quarter of this year, with official statistics showing a more significant than expected drop in industrial production in July, largely due to weak performance in the automotive sector, according to Reuters.

This slowdown has raised concerns that Europe's largest economy might contract again in the third quarter, potentially leading to another recession following the one at the end of last year.