China Comes For Volkswagen’s Factories
Volkswagen’s cost-cutting campaign in Germany has reached the point where even the company’s union is considering the idea of Chinese automakers building vehicles in underutilized VW factories.
This sentence would have seemed absurd ten years ago.
Germany’s IG Metall union, one of Europe’s most influential labor organizations and historically a strong advocate for jobs in the nation’s auto sector, said Monday it would not automatically oppose Volkswagen opening its excess factory capacity to Chinese partners. The caveat, however, is that any deal should support Volkswagen’s own long-term industrial plans rather than quietly replace them.
“We do not categorically reject such ideas,” a union spokesperson said. Reuters. “Each specific case must be carefully evaluated.”
Volkswagen has spent the past two years grappling with shrinking margins, slowing demand for electric vehicles in Europe, brutal competition from Chinese manufacturers and the uncomfortable reality that many of its German factories are simply no longer operating at full capacity. The company narrowly avoided factory closures last year after reaching a tense deal with social groups that included cutting 35,000 jobs across Germany while preserving the country’s manufacturing footprint.
But keeping factories open and keeping them busy are two very different things.
Attention is now turning to facilities such as Volkswagen’s Zwickau plant in eastern Germany, which has become the company’s first factory fully converted to electric vehicle production. At the height of European electric vehicle optimism, Zwickau was meant to symbolize Volkswagen’s electric future. Instead, the factory spent much of the last year operating below capacity as consumer demand for battery-electric vehicles eased in parts of Europe.
Saxony’s Economy Minister Dirk Panter openly suggested this week that Zwickau could become a candidate for cooperation with Chinese automakers seeking to expand their European manufacturing presence.
“It is better to further develop industrial expertise at VW in Saxony and secure production rather than fight a losing battle and lose value creation,” Panter told the German newspaper. Picture.
Chinese automakers including BYD and Geely are aggressively moving into Europe, bringing with them cheaper electric vehicles and increasingly competitive technology. Meanwhile, European manufacturers are grappling with high labor costs, expensive energy, stricter emissions rules and a regional electric vehicle market that no longer seems as secure as executives thought five years ago.
