“Overdue wake-up call”
Expert sees VW quake as a sign of location problems
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Analysts are not surprised about Volkswagen's austerity measures. This is the result of location problems, structural changes – but also wrong decisions. And the car manufacturer is unlikely to be the last large corporation.
New austerity program, possibly the first plant closures: Chief economists see the tightened austerity measures at Volkswagen as a synonym for Germany's current location problems. “This shows once again what the long-term consequences are of years of economic stagnation and structural change in an environment without growth,” said ING chief economist Carsten Brzeski. “The automobile industry is not only symbolically important for Germany, but also a key industry for the national economy.”
The chief economist at Hauck Aufhäuser Lamp Privatbank AG, Alexander Krüger, sees it similarly. “The location factors in Germany have been deteriorating for years,” he said. “It's no wonder that companies and industries get into difficulties, especially if they operate internationally.” The fact that heavyweights are now also affected shows the dimension of the location problem. But it is also clear that some trends were recognized too late.
ING expert Brzeski pointed out that there has been a steady increase in bankruptcies and unemployment in Germany recently. “If such an industrial heavyweight really has to tighten austerity measures and close plants, it may be a long-overdue wake-up call that the current economic policy measures must be significantly increased,” said the chief economist.
Analyst: Not the last major corporation
It was only “a matter of time,” says market manager Salah-Eddine Bouhmidi from broker IG. Falling inflation means that companies can no longer pass on their costs to customers and thus margins will fall in the future. “Today VW is announcing a drastic savings program that is aimed precisely at the future margins of the VW Group. VW will not be the only large corporation, a number of companies will follow and put pressure on the labor market,” emphasized Bouhmidi.
Volkswagen is drastically tightening its austerity measures and is putting plants in Germany to the test for the first time in its history. The company announced internally that without quick countermeasures it cannot be ruled out that car factories and component factories would be closed. In addition, the job security that has been in effect since 1994 and runs until 2029 is to be terminated. A restructuring based solely on demographic developments is not enough to increase competitiveness.
According to calculations by “Automobilwoche”, capacity utilization in the VW plants was significantly lower than that of other car manufacturers. Bringing up the rear in 2023 was the factory in Osnabrück with a capacity utilization of less than 20 percent, followed by the glass factory in Dresden with 30 percent capacity utilization. “All in all, there is too much capacity,” said Stifel analyst Daniel Schwarz. Ultimately, a plant should be closed where it can best be implemented politically.
Austerity program misses target
VW is the largest industrial employer in Germany. With the half-yearly figures, CFO Arno Antlitz had already called for additional efforts to achieve the margin targets. In the first half of the year, the car manufacturer took in more, but earned less. VW referred to the costs of severance payments and the possible closure of the Audi factory in Brussels.
But the company is also struggling with the increasing proportion of electric cars. In the long term, VW does not generate as high returns with electricity-powered vehicles as with combustion engines. In addition, the austerity program launched in 2023 is not having as good an effect as hoped. The company wanted to save ten billion euros in the core brand by 2026; VW had set a target of around four billion euros for the current year. According to media reports, the savings this year will be several billion euros less than actually planned.
