Volkswagen employees have launched a major social movement, in response to the drastic savings plan announced by the manufacturer at the start of the school year.
Volkwagen's new electric range experienced launch problems, particularly linked to its on-board software (AFP / JENS SCHLUETER)
Emblem of post-war Germany's economic success, Volkswagen today embodies the crisis experienced by the German industrial model.
Sluggish profitability, strategic errors, painful transition to electric, the list of difficulties is long for the leading European manufacturer, whose employees launched strike action on Monday, December 2 to prevent the closure of factories.
High costs
Volkswagen CEO Oliver Blume continues to insist that the manufacturer's costs are too high and the profit margins of its historic VW brand, which represents a little more than half of sales, too low.
Produce in Germany, in the group's ten factories,
“often costs more than twice as much as the average of our European sites”,
says the group’s boss.
In addition to labor, the entire German economy is suffering from energy prices which have increased in the wake of the war in Ukraine, before which manufacturers bought Russian gas
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“VW has too many employees who produce too little”,
believes automotive expert Stefan Bratzel. The main brand produced 2.52 million vehicles last year with 200,000 employees worldwide, including 120,000 in Germany.
For comparison, Japanese rival Toyota manufactured almost four times as many, under its brand, or 9.5 million, with barely twice as many employees.
VW's profit margin, at 4.1% in 2023, is well below that of its main rivals. It fell to 2% in the first nine months of this year.
Dependence on China
The Volkswagen group has long benefited from China, which represents around a third of its sales with three joint ventures and 39 factories, but where it is now rapidly losing momentum.
The manufacturer can no longer count, to boost its performance, on this huge market which helped it recover from the Dieselgate scandal in the 2010s.
The Chinese economic slowdown is weighing on the group's sales and local manufacturers, notably BYD, have quickly imposed their technological lead in electric vehicles.
“The cake has become smaller and we have more guests at the table,” Oliver Blume keeps repeating.
VW, quasi-state enterprise
For decades, politics and industry have shared the steering wheel within Volkswagen, since the German state of Lower Saxony (north-west), where the group's headquarters are located, is a 20% shareholder.
This gives regional authorities a blocking minority on important decisions, a
“problem that no one has been able to solve for 50 years”,
selon l'expert automobile Ferdinand Dudenhöffer.
This influence “harms the company's ability to adapt” which operates like “a state enterprise”, he asserts.
Co-management, inherited from the post-war period, also grants employee representatives on the supervisory board, the group's control body, a right of veto concerning the creation and movement of production sites.
Hence the bitterness of the negotiations underway for two months on the savings plan.
Delicate electric turn
In its race to go electric, VW launched the ID range which experienced problems linked to its on-board software, slowing down sales and generating negative feedback from users.
In question, the decision of former CEO Herbert Diess to develop internal software via the subsidiary Cariad, a costly project which failed and caused the manufacturer to lose precious time in the implementation of new features (infotainment, autonomous driving) .
VW hopes to relaunch with an investment of up to 5 billion euros in the American start-up Rivian to design a new software architecture, an element at the heart of vehicle design and an area where “Tesla is the reference”, according to VW. automotive expert Stefan Bratzel.
This will require VW to “become partly a software company, a cultural and organizational challenge” for the group whose success has been built on thermal models, from the Beetle to the Golf.
