Where did it all go wrong for Volkswagen? The German carmaker is said to be planning to shut several factories and lay off thousands of staff. Workers who do keep their jobs could see their pay cut by as much as ten per cent, according to VW’s top employee representative, Daniela Cavallo.
If the revelations are correct, the three factories will be the first to be shuttered in the company’s 87-year history. It is hard to overestimate the scale of the shock that the claims about VW, a company that has always been emblematic of the country’s post-war economic miracle, has delivered to the German economy today. Yet Germany – and, indeed, VW – only has itself to blame.
VW is said to be planning to shut several factories and lay off thousands of staff
Poor sales and a gloomy outlook for VW’s electric vehicle business has meant that the writing has been on the wall for some time. A mis-managed transition to a net-zero economy has led Germany to crisis.
The German industrial model has been under pressure for years. But VW’s mooted plans appear to confirm just how much trouble it is in, with trade unions alleging that a brutal restructuring is underway that will rip the heart out of an auto industry that powers Germany’s economy. The unions are already planning to oppose the changes: Thorsten Groger, the chief negotiator at IG Metall, Europe’s largest union, has promised ‘resistance of a kind it could never imagine’. But even if the unions do win this fight, it’s hard to see how VW can continue down the path.
Company fortunes do, of course, fluctuate all the time. Other auto giants, both in the United States and in Europe, have had to restructure and lay off staff. Yet it wasn’t long ago that other carmakers looked on at VW in envy: it was one of the best-managed businesses in the world, with brands such as VW, Audi, Skoda and Seat dominating auto markets.
Its weakness is almost entirely the fault of a mis-managed drive to Net Zero. German energy costs have soared in the wake of the Ukraine war, as cheap Russian gas has been turned off. Germany could have responded by building nuclear power stations, or, of course, by using its abundant resources of shale gas. But the country’s green establishment refuses to properly contemplate either course. It has stuck instead with expensive imported gas and renewables. But building cars requires a lot of energy, and it is impossible for Germany to stay competitive when power costs more than in the US, the Gulf or Asia.
Subsidies for electric vehicles, and targets to phase out petrol-driven cars, have hardly helped matters. German carmakers were once all-conquering. But these measures opened a window of opportunity for their Chinese rivals to seize a share of the automotive markets. They have brilliantly exploited this opportunity. China saw its chance to make cheaper, better designed EVs. Firms like VW were left trying to flog models that are so overpriced that no one wants them.
Sure, everyone agrees that climate change is important. There’s no doubt that we need to find a way of shifting to a low-carbon economy. Yet the blunt truth is this: Europe has completely mismanaged the transition, ignoring its industrial base, and complacently assuming that ‘well-paid green jobs’ would miraculously appear to replace any that were lost in traditional manufacturing. One of the biggest employers in its biggest economy is now paying the price. Unfortunately, VW won’t be the last.
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