Volkswagen — Europe’s largest automaker — is running out of time to turn itself around, according to its finance chief, as the German firm faces its first-ever factory shutdown.
Arno Antlitz on Wednesday told a hall of thousands of workers, and more watching on screens outside, that Europe’s car market hadn’t recovered from the pandemic, Reuters reports. More than that, Volkswagen is facing a demand shortfall of 50,000 vehicles — or the equivalent of two plants.
According to The Guardian, Antliz said Volkswagen expects to sell around 14 million vehicles annually in the future, “if at all.” In 2023, the company delivered 9.24 million vehicles, making it the second-largest automaker by sales, only outmatched by Toyota Motor Co.’s delivery of 11.2 million units to consumers.
“The market is just not there,” Antlitz told the workers at Volkswagen’s headquarters in Wolfsburg, Germany, stating that he doesn’t believe sales will recover. The core Volkswagen brand, which accounts for the majority of its sales, has “one, maybe two” years to slash spending and adjust output to match demand.
Earlier this week, Volkswagen said it was considering closing factories in Germany and ending a 30-year-old job security pact with workers as it looked at ways to deepen its $11 billion cost-cutting plan. Volkswagen hasn’t closed a plant since 1988, when it shut down its location in Pennsylvania’s Westmoreland County. In July, it weighed closing down an Audi factory in Brussels, as demand for high-end electric cars sank.
In a statement earlier this week, Volkswagen CEO Oliver Blume cited Germany’s lack of competitiveness, which is being held back by a cutback in consumer spending. Logistics, energy, and labor costs are shrinking the company’s margin, which is currently sitting around 2.3%, down from 3.8% last year. The brand is also underperforming in China, even as the nation’s domestic automakers seek footholds in Europe.
In response to Volkswagen’s potential shutdowns, works council chief Daniela Cavallo said that management had “massively damaged trust” and likened the closures to a “declaration of bankruptcy,” Reuters reports.
Cavalo also asked Blume to explain why Volkswagen is prioritizing its up to $5 billion partnership with electric truck startup Rivian over protecting German jobs. The deal — which provides Rivian with some sorely-needed cash — is intended to help both companies launch vehicles with new technology and slash production costs.