Penalties, electric car misery, costs: Oliver Blume is struggling with several problems at VW at the same time, which can only be solved in the medium-near future.
Oliver Blume is actually a confident conversationalist. The CEO of the VW Group always tries to remain calm and likes to pull up both jacket sleeves a little, which is perhaps meant to symbolize a willingness to get to work. When faced with difficult questions or facts, he stands firm and calm, tucking his arms into his waistband. His credo is that you have to take things in good spirits. There is only one topic that sometimes makes Blume nervous. He starts stumbling, talks faster, and doesn’t finish sentences.
This is what happens when he is asked about his operations in the Chinese region of Xinjiang. Here, the Chinese government is oppressing the Uighur minority and critics repeatedly accuse Volkswagen of indirectly helping with this.
Oliver Blume is not shy about his attitude to the constant accusations: it’s annoying. It’s extremely annoying. He’s explained it a hundred times. The plant is small, it wasn’t his idea (but that of his predecessors), and the company is now looking for a solution that will finally pass the responsibility on to its local partner. But only so that the international criticism will be silenced, which the boss finds unfair from the bottom of his heart. He would rather have described his company as a defender of human rights than as an accomplice in their violation.
When Germany’s largest industrial group invited its shareholders to the annual general meeting at the Berlin trade fair last year, Xinjiang still played an important role. Rows of protesters mingled with the audience and threw around fake banknotes and a cake. The board of directors deployed a security cordon made up of three rows of security staff and looked like the Politburo in its final days.
There was an ugly cake stain on the desk of supervisory board member Wolfgang Porsche, which VW employees spent hours trying to remove in Kafkaesque and futile attempts, thereby drawing attention to it even more. And it was not just the protesters who denounced VW’s Xinjiang activities; speakers from the major investment companies and shareholder advocates also echoed the same sentiment.
VW meeting prefers digital after too much criticism last year
This year’s annual general meeting is probably only taking place virtually, probably because of the events of last year. At that time, after the pandemic, the company presented itself as an approachable people’s stock corporation with fresh cars that you could climb into and touch, as well as plenty of currywurst for small investors, as one that, unlike others, maintains direct communication with its investors. Now it is simply saying that the digital version is cheaper and more practical. VW will not prevent Xinjiang from being mentioned, however, especially since the company has not yet been able to present the solution it is aiming for for operations there. The activist movement has also signaled that it is coming up with digitally appropriate forms of protest.
In purely business terms, the company has far greater problems than the 200-person site in the Chinese province. In Europe, the electric car conversion is not making any progress, and in China the former market leader is being left behind by increasing domestic competition in the electric car sector – the same competition that could soon make life more difficult for local manufacturers on the European market as well.
Tariffs and trade wars threaten to make the entire fragile system of global car companies expensive and difficult. Despite all its efforts, the German company is still lagging behind in terms of profitability, the luxury brand Audi has lost its shine, and the software division, which was built up with much fanfare, is already in need of restructuring. Blume praises himself for his clean-up work over the last year and a half, but this is not yet reflected in the sluggish share price.
Electric car for 20,000 euros from 2027
His message now is: It may be difficult, but things will soon get better. This year, the group is preparing more than two dozen new model launches, which costs a lot of money and effort, but promises more business. For example, the completely redesigned bestseller VW Golf, which is also celebrating its 50th anniversary this year, and the station wagon version of the electric ship ID.7, on which many hopes are resting.
The group’s general cost problem has been recognized and is already being resolved. Among other things, a major personnel reduction program is underway, which, according to management, has already been taken up by a sufficient number of managers and engineers willing to leave.
The effects of all his efforts will be clearly visible as early as 2025, and even more so in 2026, Blume promises. However, he also admits that there are risks. Above all, regulation, i.e. tariffs and further back and forth on electrification. If the current CO2 regulations in the EU remain in place, next year could bring another major burden. VW would either have to push electric vehicles onto the market on a large scale, foregoing profits. Or use so-called pooling and credits, as the technical terms are called, i.e. pay money to competitors who are more exemplary in terms of CO2 emissions, so that they offset their good values against VW’s potentially bad ones in order to ultimately jointly stay below the limits.
In the past, the Germans have tended to rule out such trickery, but now, given the poor sales of electric cars, Blume is certainly considering it. Otherwise, VW could face high fines, which would be more expensive and would also be more damaging to its image.
After all, the company was able to announce this before the annual general meeting, it has paved the way for a small, affordable electric car that will be available from 20,000 euros from 2027. A model for 25,000 euros called ID.2 is already in the planning stages, and the new project, perhaps ID.1, will now probably be developed largely by Skoda in the Czech Republic and will probably also be built there or in Slovakia.
Such small cars, which are difficult to make money with, do not necessarily boost margins, but Blume believes they are important for brand loyalty. And to ward off Chinese competition, which will probably soon be pushing its way onto the European market with cheap, small and practical electric cars.
Source: Stern
