Drama at Volkswagen After CEO Suggests 30,000 Job Cuts


Volkswagen CEO Herbert Diess has been facing off with the company’s German workforce for weeks over the changing nature of the business. VW vowed to transition itself toward an all-electric lineup following the 2015 diesel emissions scandal. But the necessary steps to get there haven’t been universally appreciated.

The general assumption has always been that electric vehicles would result in massive layoffs across the industry by nature of their needing fewer parts than internal combustion vehicles. But Volkswagen seems worried that it’s falling behind smaller rivals and needs to take decisive action to make sure it’s not outdone by firms operating in the United States and China. The proposed solution is an industrial overhaul designed to fast-track VW’s electrification goals. Unfortunately, German labor unions are convinced that this plan would incorporate massive layoffs and have become disinclined to offer their support. The issue worsened in September when Diess told the supervisory board that a slower-than-desired transition to EVs could result in 30,000 fewer jobs. 

Considering the size of most legacy automakers, there’s really no way around these prospective layoffs. Batteries, which represent the most labor-intensive aspect of an EV, are often outsourced to other companies and the residual work simply doesn’t require the same number of hands. Companies are seeing the table set before them. Fewer workers mean diminished payroll expenses and, since EVs have been heavily subsidized by governments, they can afford to sell more expensive products without consumers getting up in arms.

However, the capital expended just to get to this point has been nothing short of massive. Volkswagen has said it intends to spend around 16 billion euros ($19 billion USD) on developing “e-mobility, hybridization and digitalization” by 2025. Additional funds have been set aside for charging subsidiaries and its autonomous vehicle program — the latter of which is finally supposed to yield fruit by 2030.

Those with reliable memories will recall that the automotive industry was previously promising self-driving passenger vehicles would be on sale by 2019. The timeline for electrification has been similarly pushed back, albeit not nearly as much. EVs are still presumed to reach financial parity with combustion vehicles by 2025. Though their adoption rate is not on pace to supplant them as the dominant mode of transportation for at least another decade, even with aggressive mandates designed to discourage gasoline/diesel use cropping up across the Western world.

This means companies are spending more to make EVs work for them and it’s looking like Volkswagen is getting tired of waiting. It wants to be the next Tesla, only much bigger, and leadership believes it should free up more money to expedite the process. But labor unions are starting to wonder what’s actually in this for them besides a few thousand fewer jobs and the current conflict is only widening the existing rifts with management.

“I’m being frequently asked why I keep comparing us with Tesla. I know this is annoying to some,” Diess told workers this week. “Even if I no longer talk about Elon Musk: he’ll still be there and revolutionises our industry and keeps getting more competitive quickly.”

According to Reuters, Diess has actually been having a series of meetings with German labor groups who have been expressing their growing dismay with electrification strategies over the last couple of years.

“Only as a team can we make Volkswagen future-proof,” The CEO pleaded in one such meeting attended by VW works council boss Daniela Cavallo, Lower Saxony state premier Stephan Weil, and head of IG Metall Joerg Hofmann.

From Reuters:

The conflict highlights the limitations Diess faces in steering the behemoth that employs 675,000 staff and navigating a complex stakeholder structure, where labour representatives and the state of Lower Saxony have a majority on the supervisory board.

Sources familiar with the matter said on Wednesday a specially convened committee would discuss the future of Diess in an attempt to solve the dispute.

Works council boss Cavallo criticised Diess for his communication style in recent weeks, which she said fuelled concerns the transformation he was proposing will result in tens of thousands of job cuts.

“We’re tired of hearing time and again that the works council is apparently only concerned with preserving the status quo,” she said, adding workers and labour representatives were all backing the needed overhaul.

Diess, in a supervisory board meeting in September, warned that as many as 30,000 jobs could be lost if Volkswagen was not fast enough in transforming itself, sources have said. He has said Tesla is much more efficient with its much smaller workforce.

That may be true. But Elon Musk has said that Tesla’s smaller size has also made it harder to get favorable treatment from Western governments, citing the Biden administration’s decision to prioritize union-backed EVs in its tax credit scheme and Germany’s fierce pushback against the Berlin-Brandenburg Gigafactory.

Tesla being barred from the White House EV summit has also become a point of contention. “Yeah, seems odd Tesla wasn’t invited,” Musk said in August, adding that his company produced more electric cars than any other company in the world.

When White House press secretary Jen Psaki was asked why Tesla had been excluded from the event she said that the press was welcome to draw its own conclusions.

Diess has said Mr. Musk has been in contact with Volkswagen leadership and even spoke with them for over an hour during an October phone call. Though Volkswagen’s works council reportedly wasn’t all that impressed by the supervisory board’s alleged closeness with Tesla.

“The fascination that you apparently feel for Mr. Musk and the effort you’re making in staying in contact with him — we would welcome if it was the same for the huge challenges the company currently faces,” Cavallo said in response.

[Image: Volkswagen Group]

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