Stakeholders from various sectors are collaborating to prevent a crisis in the automotive industry, particularly concerning Germany's auto giant Volkswagen.
FRANKFURT, Sept. 29 (Xinhua) -- As the predicament in Germany's auto giant Volkswagen (VW) unfolds, several jobs are on the line. Stakeholders from various sectors are collaborating to prevent a crisis in the automotive industry, particularly concerning VW.
Earlier this week, German Economics Minister Robert Habeck convened a "car summit" to discuss the headwinds facing the country's auto industry with representatives of the German Association of the Automotive Industry, workers' union IG Metall and leading carmakers such as VW, BMW and Mercedes-Benz. The summit aimed to find common ground to navigate the industry challenges.
The summit failed to yield an immediate solution, but Habeck was quoted by local media as saying that the government would devise concrete measures to tackle the current crisis. Some analysts said this puts the German auto industry at a "make or break" moment.
The summit was triggered by an ongoing dispute at VW, Europe's largest carmaker. In early September, the company announced that its management was mulling plant closures at home as sales in Europe have been shrinking during the past few years.
German automakers' capacity utilization has been decreasing. VW revealed it had around 500,000 cars of excess capacity, equivalent to two plants.
On Sept. 10, the company announced that it was terminating labor agreements, which provided job guarantees until 2029 at six plants in Germany. The job security agreements at VW have been in practice for decades, and their scrapping is widely considered a precursor to layoffs.
Both the consideration of plant closures in Germany and the termination of job security agreements are unprecedented in the carmaker's history.
VW recently denied reports indicating that up to 30,000 jobs with the automaker in Germany are at stake.
On behalf of employees, IG Metall bluntly rejected the idea of layoffs and insisted that the company's management should be responsible for weathering the challenges.
VW has been under pressure to fulfill an ambitious program it initiated in 2023 to cut costs by 10 billion euros (11 billion U.S. dollars) by 2026. For the second time in three months, VW cut its yearly estimate on Friday. It now projects an operating profit margin of roughly 5.6 percent in 2024, down from the range of 6.5 to 7 percent it had previously predicted. The company had already reduced its profitability prediction in July partly due to anticipated expenses for the Audi plant in Brussels.
The VW crisis has had a far-reaching effect on the German auto industry and may even spill over to other pillar industries.
The auto industry is at risk of losing market share to competitors in the future, which could cause the mechanical engineering industry to lose its key national sales market, warned a report published by the Federation of German Industries this month.
At the center of the crisis is the auto industry's transformation toward an e-mobility future.
Despite pressure from the electric vehicle (EV) and the German government for a faster transformation, automakers are cautious about phasing out internal combustion engine (ICE) vehicles, on which the German auto industry flourished.
At a time when ICE vehicles are more profitable, and consumers in the EU are growing more reluctant to adopt electric cars, which are yet to outperform ICE vehicles in cost and range, German carmakers are torn between going all-electric and retaining ICE production.
The abrupt withdrawal of incentives for electric vehicles in Germany in December 2023 has been blamed as one of the main reasons for the slump in EV sales this year. Media reports indicate that policymakers in Germany are considering reviving the incentive scheme to encourage the uptake of EVs.
Habeck stated that while the government would need to play a role, carmakers like VW must address most of their own structural issues.■