HomeCar NewsVolkswagen might cut jobs to reduce spending during shut down

Volkswagen might cut jobs to reduce spending during shut down

Volkswagen AG is not making any sales outside China and is rethinking production strategies

Volkswagen, among other major automakers, has been hit badly by COVID-19 aka corona virus and might have to cut jobs if matters cannot be brought to control soon. Herber Diess, CEO of Volkswagen AG, states that it is spending $2.2 billion (€2 billion or Rs 16,500 crore) globally with each passing week. With many major OEMs shutting down their production facilities to ‘flatten the curve’, businesses revolving around automobiles (components manufacturers, dealerships, suppliers, logistics and many others) are facing a questionable future.

Volkswagen AG employs around 6,71,000 people worldwide and COVID-19 has virtually brought down its sales figures to negligible figures outside China. This has left Volkswagen with no other option than to resume production somewhere else in order to save its staff from losing their jobs. However, rethinking production strategies would bring forward its own set of problems alongside initial financial confusions.

Herber Diess stated that Volkswagen AG can only get over its present struggles if markets such as China, Korea and other Asian regions either recover from COVID-19 or bring its spread to control. However, this would still require “a very sharp intervention”.

Diess further added that China’s demand for Volkswagen products is picking up but production is still running at half capacity compared to what was before. Volkswagen AG has 124 manufacturing facilities in total, out of which 72 are situated in Europe (28 plants in Germany alone). At present, no facility is in operation across European nations. Despite shut down, the company is spending about $2.2 billion every week. To reduce the spend, the company might cur jobs.

Meanwhile, Volkswagen AG is also working on ways to facilitate production with workers keeping safe distances from each other. In parallel, effective hygiene and disinfection protocols would be employed as well. Frank Witter, Chief Financial Officer of Volkswagen AG, has also hinted about a short-term debt with ECB (European Central Bank).

In India, COVID-19 shutdowns came during an already-struggling period for major OEMs. Dealerships were having a tough time clearing off leftover BS4 stock at substantial discounts ahead of a stipulated deadline (1 April 2020). Now, nation-wide lockdowns have brought down sales to a standstill. FADA (Federation of Automotive Dealers Associations) had already set out to find a short-term solution to this but could achieve only partial success — read more details.

Automotive dealerships across India are now allowed to sell just 10 per cent of their unsold BS4 stock for 10 days after lockdown measures are withdrawn. This wouldn’t be a major relief to dealers since there is roughly Rs 6,300 crore worth of BS4 vehicles lying unsold, as per data.

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