Volkswagen CEO Oliver Blume clarified at an employee meeting on Wednesday (May 20) that Volkswagen is currently not in negotiations with Chinese manufacturers regarding the issue of overcapacity in its European car factories. This move quelled industry speculation about potential cross-border cooperation.
The meeting held at Volkswagen’s headquarters in Wolfsburg comes at a time when the future of the company’s German factories is increasingly under scrutiny from the outside world. Faced with declining profits, sluggish demand, and intense competition, this largest European automaker is under pressure to streamline its massive production network.
Blume admitted during the meeting that the automotive market has undergone fundamental changes, and sales in Europe may never recover to pre-pandemic levels. He stated, “We still have overcapacity at our factories in Europe and Germany. We need to address this issue to stay competitive.”
He emphasized, “There are currently no plans or negotiations with Chinese manufacturers.”
As cheaper Chinese electric vehicles (EVs) continue to flood the European market, Volkswagen is facing significant pressure to streamline its operations. Blume mentioned that a three-year austerity policy, including cutting 50,000 jobs in Germany and downsizing the Audi and Porsche brands, has prepared the company to withstand high tariffs and market shifts during uncertain times.
To survive in a sluggish market and maintain its razor-thin profit margins, Volkswagen must find ways to manage its underutilized assembly lines without violating strict domestic labor agreements. Volkswagen has pledged to reach agreements with German unions and the company’s works council to avoid directly closing factories.
Last month, Blume suggested that Volkswagen could lease its excess factory space to defense contractors or explore factory-sharing agreements with expanding Chinese EV brands seeking to establish manufacturing bases in Europe. However, this sparked media speculation about potential partnerships similar to the recent agreement between Stellantis and Chinese automakers.
Amid concerns for domestic industry, government officials in Lower Saxony and Saxony initially held an open attitude toward factory cooperation with China. But as Chinese automakers like BYD and Chery seek to expand their market share in Europe, others warn that establishing partnerships could boost competitors.
With Chinese automakers currently sidelined, Volkswagen is moving forward with negotiations to sell its factory in Osnabrueck, northern Germany, to a defense partner. Works council chair Daniela Cavallo urged to stop speculating about the future of German factories and called on management to focus on product success.
(This article references reports from Reuters and other sources)