Volkswagen requires a fresh figure akin to Peter Hartz.
Due to VW Group failing to meet their savings objectives, the board is contemplating severe measures like potential layoffs and even shutting down a German plant. This once unlikely scenario might become a stark reality.
With just seconds to spare before midday in Wolfsburg, the decision to rescind the employment guarantee extending until 2029 can be justified.
Should this occur, the unimaginable will materialize. The sacred cow VW has been nurturing would then face its demise. Even high-ranking executives in Wolfsburg may find themselves out of a job. Layoffs inspired by operational issues at VW. The tremors in Lower Saxony would undoubtedly be felt.
Indeed, the German automotive sector grapples with immense obstacles. For instance, the advancement of electric vehicles demands substantial investments. The profit margin for electric vehicles is significantly lower than that of regular combustion engines. VW, in particular, is impacted. The low profit margins and powerful influence of employee representatives in Lower Saxony's state-owned stake make the company slow and costly.
This predicament reminds one of the early 1990s. At that time, VW was burdened by exorbitant costs and an excess production capacity. The company's CEO, Ferdinand Piëch, had a contentious relationship with employee representatives. Layoffs due to operational reasons had seemed imminent then.
Enter Peter Hartz. Piëch appointed Hartz, a native of Saarland, as the works director. Hartz introduced the 4-day workweek and decreased the weekly work hours from 36 to 28.8. Labour costs dropped, and the workforce was maintained.
VW could use a modern-day Peter Hartz.
Manufacturers across the industry are closely watching VW's situation, given the potential implications for their own operations. If layoffs and plant closures actually transpire, many manufacturers might be forced to reevaluate their own cost structures.
In the face of these challenges, some manufacturers are looking to automate more processes to cut costs and increase efficiency, a strategy that VW could also consider.
