The CEO of Volkswagen Group, Oliver Blumehas defended the adjustment plan proposed by the group’s management due to the delicate economic situation that it is going through, which contemplates the closure of up to three production plants in Germany. Regarding the union plan, which contemplates a cost reduction valued at 1.6 billion, has declared that it is “insufficient.”
«We are not operating in a fantasy world, and the current situation is serious. New competitors are entering the market with unprecedented force, and the price pressure is immense,” commented the German businessman, during a meeting with workers at the group’s headquarters in the German city of Wolfsburg. Blume has not hesitated to confirm that the leadership of Volkswagen is, at the moment, worried for “the future of the company.”
Following Volkswagen’s annual results, which in October reflected a 21% year-on-year drop in operating profit, it became clear that Volkswagen’s situation is worrying. Consumer demand, which has not yet recovered after the pandemic, and the slow transition to the electric model in which the company is immersed are several of the reasons why the company is in a delicate moment.
However, the main challenge What the German automobile giant faces is its situation with respect to China. Both in the face of manufacturers from that country, who have emerged as plausible alternatives for European consumers, such as its sales in the Far Eastern country, where weakens a market that was previously a stable and profitable source of income for the brand.
One of the group’s main objectives to overcome this recession is, in Blume’s words, to work on its return to Chinaone of its most lucrative markets to date. The competition with local manufacturerswhich are bursting into the automotive market with force, has snatched a important market share to Volkswagen, which needs to re-establish itself in the eastern giant.
Among the causes of this concern, the manager has cited three: the pressure of competition, which increases considerably with the emergence of foreign manufacturersthe reduction in demand and labor costs, which he considers “too high.” Likewise, Blume has reaffirmed its interest in working together with the unionsin order to reach a solution, although he warns that “there is still a lot to negotiate.”
Last Monday, tens of thousands of Volkswagen workers gathered at the group’s main plant, in Wolfsburgto protest against the salary cuts, factory closures and workforce reductions planned by the automotive group. The German Minister of Labor also attended the meeting, Hubertus Heil. Volkswagen continues to use the emergence of Chinese competition to justify the cuts, but workers describe these measures as “red lines.”
There is still a long way to go
Besides, Blume has analyzed the union counterproposal for cost reduction, presented by the union IG Metall. “It is far from being enough, although it could be a starting point,” acknowledged the group’s CEO. «We can make the best cars in the world, but that doesn’t matter if we don’t make money with them«he added.
According to management estimates, Volkswagen’s crisis would find relief with a cost reduction of up to 10 billion eurosto which they add the closure of several plants and a general salary reduction of 10% for German employees.
Daniella Cavallothe president of the Volkswagen group works council, has repeatedly criticized Blume for “not getting involved enough in the conflict.” The worker leader points out that all parties, including management and shareholders, must take part in the situation to overcome the delicate situation.
Likewise, Cavallo has stated that the unions are committed to reaching an agreement before christmas. However, he affirms that said agreement “will entail commitments, as well as concessions. Things that you don’t like and that hurt you, in one way or another. But it must be for all parties,” he declared.
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