Volkswagen closes German factory, Blume is willing to "get a speeding ticket" to enter the Chinese time

"The situation is very serious." This is how Volkswagen Group CEO Oliver Blume judged the company's current environment.

On September 2, local time, Volkswagen issued a statement saying that the company is considering closing two factories in Germany to save billions of euros in costs.

This is the first time Volkswagen has closed a local factory since its founding 87 years ago. Globally, the last time Volkswagen closed a factory was in 1988, when it closed a factory in Pennsylvania, USA.

Closing a factory will inevitably be accompanied by layoffs.

If Volkswagen eventually decides to close the two factories, it means that it will also have to terminate the employment protection agreement signed with the Volkswagen Union in 1994. The agreement explicitly promised that Volkswagen would prohibit layoffs until 2029.

Closing the factory will inevitably lead to a conflict between Volkswagen management and the union, which is undoubtedly a dangerous move because the union power of Volkswagen is extraordinary.

Currently, Volkswagen Group's Supervisory Board has a total of 19 seats, of which union representatives occupy 9. In addition, the Lower Saxony state government, which owns 20% of Volkswagen, usually stands on the side of the union.

In other words, the union has a strong interference effect on the decision-making of management. Before Blume, the former Volkswagen CEO Diess laid off 30,000 employees worldwide, saving Volkswagen 3.7 billion euros in expenses, but he had a fierce conflict with the union and eventually stepped down.

It is foreseeable that when Blume again proposed "cutting factory, supply chain and labor costs", the resistance he would encounter would be no less than that of Diess a few years ago.

In fact, as early as March 2023, Volkswagen announced a 10 billion euro car cost reduction plan, which would require a 4 billion euro reduction in 2024. However, Volkswagen's financial report for the first half of 2024 showed that this goal could not be achieved.

Volkswagen's decision to close the factory has met with little resistance because the situation does not allow anyone to hesitate or obstruct. Almost everyone knows that the severe situation facing the European automotive industry is unlikely to recover in the short term.

At the same time, it is highly likely that the German economy will experience a recession in 2024. It is basically impossible for a giant automaker like Volkswagen to turn things around by relying on the European market.

Winter is here, and it is inevitable for Volkswagen to lose weight and gain weight.

But whether such a plan can be implemented smoothly remains to be seen. At present, Volkswagen's union has announced its resistance to Obermud's decision to close factories and lay off employees, and the German Metal Industry Union accused Volkswagen's leadership of "irresponsible" plans that shook the foundation of Volkswagen.

But the course of history will never be changed by human will. Now not only Volkswagen can’t bear it, but Audi, which also belongs to the Volkswagen Group, is also a little overwhelmed.

In early July this year, there were rumors in the market that Audi might close its Brussels factory. This factory has a long history and produces about 30% of Audi's electric vehicles. If it is closed, it will lead to the unemployment of about 3,000 permanent workers and 500 temporary workers.

Rumors of Audi closing factories have also triggered resistance from the union. The last conflict between Volkswagen management and the union led to the early resignation of former CEO Diess. It is hard to say whether the factory closure plan will be implemented this time. Volkswagen needs to go through another thrilling internal game.

But unlike his predecessor Diess, Blume has another way to go, which is to move closer to the Chinese market. Even if there are obstacles from the union or he is fined and forced to step down, it will not shake Volkswagen's determination to move forward into the future.

In the Chinese market, which contributes 35% of Volkswagen's global sales, although its market share has dropped sharply from more than 50% in 2001 to 14% in 2023, it has not affected Blume's enthusiasm for investing in China.

Among the CEOs of many multinational groups in the automotive industry, Blume's resume in China is very eye-catching. In 2001, he obtained a doctorate degree in automotive engineering from Tongji University in China. Wan Gang, who served as the dean of the School of Automotive Engineering at Tongji University in 2001, was previously a senior engineer at Audi. In 2007, he became China's Minister of Science and Technology and advocated the development of new energy vehicles.

In a nutshell, Obermu understands cars, Volkswagen, and China. The reason why he "drives" Volkswagen into China at a speed that will get him fined is because he knows that if he doesn't come in, even the window of time will close.

So while he plans to close his domestic factories in Germany, the weight of the Chinese market is constantly increasing.

In July 2023, Volkswagen spent US$700 million to acquire a 4.99% stake in Xpeng Motors;

In April 2024, Volkswagen announced an additional investment of US$2.7 billion in China to promote sales in the Chinese new energy vehicle market;

On May 13, 2024, the registered capital of Volkswagen (Anhui) Co., Ltd. increased from 7.356 billion yuan to 13.856 billion yuan, an increase of 88.4%;

In July 2024, hundreds of Volkswagen engineers will enter Xiaopeng Motors headquarters for training. The two sides will work together to develop the CEA architecture to support the development of new energy vehicle models under FAW-Volkswagen and SAIC Volkswagen. The first model jointly built is expected to be launched in 2025.

In August 2024, Volkswagen announced that it would build the world's second largest R&D center in Anhui, China, and concentrate the R&D of pure electric vehicles in China at Volkswagen (China) Technology Co., Ltd. The new cars developed will be jointly produced and sold by SAIC Volkswagen, FAW Volkswagen and Volkswagen Anhui.

As early as the Diess era, Volkswagen had become the largest shareholder of China's power battery manufacturer Guoxuan High-tech. It can be said that Volkswagen has implemented a full-scale layout from platform to software to sales in the Chinese new energy vehicle market, continuing the previous "Volkswagen of China" approach.

But Volkswagen is always a German manufacturer. Even if it really closes its factories in Germany, it will not leave its German base. However, Blume's continuous increase in investment in the Chinese market may draw a curve for Volkswagen's second take-off.

In fact, Volkswagen's main problem at present is that its transformation is too slow and it cannot keep up with the development speed of new energy vehicles around the world. China has the world's top new energy core technology and the most complete new energy industry chain in the world. At the same time, Chinese consumers have a high degree of recognition of the Volkswagen brand. With these favorable factors, Volkswagen may be able to gain a foothold in the Chinese new energy market first, and then "counterattack" back to the European and global markets.

The people laid off by a closed factory can be recruited back, but if the company goes bankrupt, nothing can be done about it. If the land is preserved but the people are lost, both the land and the people are lost; if the people are preserved but the land is lost, both the land and the people are preserved. It can be seen that Obermu understands this sentence that Chairman Mao said 77 years ago better.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.