Automobile giant Volkswagen has announced the possibility of closing two factories in Germany, its home country, an unprecedented decision for one of the world’s largest automakers and currently the largest manufacturer in Europe, with over 80 years of history.
The assessment was made in an attempt by the group to contain the financial crisis caused by the advance of Chinese competition in Europe, with the electric vehicle market booming, and by the poor economic performance post-pandemic. “In Europe, two million fewer vehicles are currently sold than before Covid,” said the group’s CFO, Arno Antlitz.
Another decision considered by Volkswagen to “protect its future”, according to a statement by the auto giant’s chief executive, Oliver Blume, published this week, is to terminate a job protection agreement made with unions, in force since 1994, which sparked protests by thousands of workers.
According to Blume, “the European automotive industry is in a very demanding and serious situation”, especially due to the “new competitors” that are entering the European market, referring to Beijing and its electric cars.
This growing competitiveness in the market, the executive said, has made Germany unattractive as a manufacturing location, which is why the automaker is considering closing factories for the first time in its history.
In addition to growing in the European market, China has been increasingly winning over customers within its own country, strengthening domestic production, while foreign companies that were once popular among the Chinese are seeing a decline in sales within the Asian giant. China’s BYD, which produces electric vehicles and has quickly gained recognition from Tesla, is one of the main drivers of this competition.
Volkswagen, for example, is one of the major automotive companies that is losing ground in China, a country considered its largest market in the world. In the first half of this year, sales fell by 7% in the Asian country compared to the same period last year. The group’s operating profit fell by 11.4% to €10.1 billion (R$62.6 billion).
Financial analyst Stephen Reitman explained to Wall Street Journal that one of the major factors that contributed to Volkswagen’s crisis is precisely linked to the production of electric vehicles.
According to him, “there are factories dedicated to electric vehicles that are not producing at the expected levels and costs are out of control”. Sales in Germany, where the automaker is the market leader, fell by a fifth until July this year, compared to the same period last year.
The possibility of closing factories in the country of origin not only attracted criticism from workers, but from the government itself, which called for caution in the decision.
Germany’s Minister for Economic Affairs and Climate Protection, Robert Habeck, spoke out last Wednesday (4), asking the group to consider measures in the “long term”, in close coordination with social partners”.
Faced with the drastic measures, Habeck also promised tax relief and contribution to a new growth plan for the Volkswagen group.
Another factor driving the plan to close the factories is Germany’s labor costs, considered the highest in all of Europe (an automotive worker costs around US$68.50 per hour – R$383), according to an analysis by the German Automotive Industry Association.
In the Czech Republic, that cost drops to $25 an hour, and around $32 in Spain. In Hungary, where China’s BYD is building a factory to avoid European Union tariffs, auto workers are paid around $18 an hour.
The war in Ukraine is also having an impact on Volkswagen’s finances due to rising energy costs in Germany as a result of losing access to cheap Russian gas from pipelines.
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