Volkswagen ‘can’t continue’ as before – CEO

Group chief Oliver Blume has defended job cuts, citing ‘serious’ economic circumstances, according to German media

Major changes are needed at Volkswagen Group if the German automobile giant is to survive, company CEO Oliver Blume has told the Bild newspaper.

Blume's statement follows an announcement earlier this month that the EU’s largest car manufacturer may close at least two factories in Germany as part of a cost-cutting drive. The potential closure would be a first in the car maker’s nearly 90-year history.

In an interview with the tabloid on Sunday, Blume defended plans for large-scale cuts. The current economic situation is “so serious that we can’t simply continue as we were,” the CEO admitted.

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The car maker’s operating profit dropped by 20% in the first quarter of 2024 compared to the same period a year earlier. In the second quarter of this year, earnings were down a further 2.4% on last year.

Moving ahead with the job cuts would save Volkswagen €4 billion ($4.25 billion), Blume claimed. The Volkswagen Group board was working on “further measures” to survive a slump in car sales, he added. Volkswagen employs around 120,000 workers in Germany.

According to Blum, the major challenges facing the European auto industry stem from the pandemic four years ago and Asian competitors entering 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 EU has become the largest overseas market for Chinese electric vehicle (EV) makers. The value of EU imports of Chinese electric cars surged to $11.5 billion in 2023, from just $1.6 billion in 2020, accounting for 37% of all EV imports to the bloc, according to recent research.

Critics of the planned cuts at Volkswagen pointed out that the group paid €4.5 billion to its shareholders for the 2023 financial year in June. Chairwoman of the left-wing political party Die Linke, Janine Wissler, told Rheinische Post newspaper last week that it was “incredibly sleazy” that Volkswagen could pay out such a sum in dividends and now claim that it can’t prevent plant closures and job losses.

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

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The German economy contracted in the second quarter of this year, according to official statistics. The country’s industrial production fell by more than expected in July, driven mainly by weak activity in the automotive sector, Reuters reported last week. The slowdown spurred fears that Europe’s largest economy could contract again in the third quarter, and go into another recession, after having suffered one at the end of last year.